Friday, March 12th, 2010
Top 3 Stock Option Trades and Plays
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SandRidge Energy Inc. (NYSE:SD), SuperValu Inc. (NYSE:SVU), and Automatic Data Processing (NASDAQ:ADP) are today’s top three stock option trades and plays.
SandRidge Energy Call Options Power Up
SandRidge Energy Inc. (SD, Free Analysis), a natural gas and oil exploration company, saw call option volume that was more than three times higher than its 10-day average. A total of 16,086 contracts traded, primarily in the Apr 9 and Jun 12 expiration dates. Traders appear to be positioning themselves for a natural gas correction and the completion of its Century Plant.
Last quarter, the natural gas firm reported fourth quarter earnings of 14 cents, versus a 21 cents consensus, on revenues of $163.1 million, versus a $207.71 million consensus. The lackluster results led to a downgrade to a Hold from a Buy at Stifel Nicolaus, but many investors believe that the Century Plant’s upstart this summer will enable it to rapidly expand.
Also see: Free Introduction to Options Video Tutorial
SuperValu Options Jump on Takeover Rumors
SuperValu Inc. (SVU, Free Analysis), a grocery chain operating under a number of names in the United States, saw its options activity explode higher after rumors surfaced that it could be a leveraged buyout target. Meanwhile, a company spokesman that said it does not comment on rumor or speculation, during the morning hours.
The grocery chain’s call option volume was already more than 40x its 10-day average during the morning hours, with some 26,000 contracts trading hands. Mar 17.50 and Apr 20 calls were among the most actively traded, given the short-term nature of the bets made. While the underlying stock lost some of its momentum, shares remain 5% higher on heavy volume.
Also see: Options Trading 101 Free eBook (PDF)
Automatic Data Processing Calls See Action
Automatic Data Processing (ADP, Free Analysis), a provider of business outsourcing solutions, saw unusually high call option volume that appeared to be tied to shares of stock. Approximately 5,000 Mar 43 calls traded at $0.95 per contract, 5,000 Apr 45 calls traded at $0.45 per contract, and 5,500 Apr 44 puts traded at $1.05 per contract.
The move comes after a March 7th story on Barrons.com indicating that shares appear to be cheap as it weathers the tough times. The article highlighted its robust cash flow, virtually no debt, and continually rising dividend as key catalysts. Meanwhile, its 20% market share of the payroll processing industry in the U.S. means it could benefit from an economic recovery.
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-- Written by Simon Monger
