E*Trade Badly Wounded, Bears Smell More Blood
ETFC – E*TRADE Financial Corp. – Shares in online broker, E*TRADE Financial Corp., fell nearly 6.0% on Wednesday after the firm said regulators may review its historical order handling practices. According to the company’s 10-Q, such an investigation, “could subject it to monetary penalties and cease-and-desist orders, which could also prompt claims by customers of E*TRADE Securities LLC.”
The statement went on to note that, “these actions could materially and adversely affect the company’s broker-dealer businesses.” Shares in ETFC fell as much as 5.5% on the news to an intraday low of .30. The stock is still in negative territory, but off the lows of the session to trade at .56 just after midday in New York. Sizable prints in September expiry put options on E*TRADE suggest some strategists are bracing for the price of the underlying to potentially extend losses in the near term.
Upwards of 6,200 of the Sep puts have changed hands thus far in the session against open interest of 623 contracts. It looks like most of the puts were purchased within 30 minutes of the opening bell for an average premium of .43 apiece. The puts may be profitable at expiration next month in the event that ETFC shares decline 6.8% from the current level to trade below the average breakeven point on the downside at .57.
SUNE – SunEdison, Inc. – Options on the maker of wafers for the semiconductor and solar industries are more active than usual today after the company posted a wider than expected second-quarter loss that sent shares in SunEdison down nearly 30% to .90 on Wednesday. The double-digit percentage move to the downside in SunEdison shares today appears to have attracted some contrarian strategists to SUNE options. Fresh interest building in front month call options on SUNE appears to be the work of traders positioning for the price of the underlying to rebound somewhat by expiration next week.
More than 5,500 calls have traded at the Aug .0 strike against open interest of just 132 contracts as of 12:30 p.m. ET. Time and sales data suggests most of the volume was purchased this morning for an average premium of .50 each. Buyers of the .0 calls stand ready to profit at expiration should shares in the name top the average breakeven price of .50.
OCR – Omnicare Inc. – Out of the money call options are active on Omnicare this morning, with shares in the pharmaceutical services company up as much as 2.9% to touch a multi-year high of .85. Trading traffic in OCR options during the first half of the session indicate one or more traders are positioning for the price of the underlying to rally sharply in the near term.
The most actively traded contracts by volume on Omnicare today are the Sep strike calls, with upwards of 2,600 lots in play versus zero open interest. Time and sales data suggests most of the volume was purchased for an average premium of .31 apiece. The bullish position makes money at expiration next month if shares in Omnicare rally 8.0% over today’s high of .85 to exceed the average breakeven point at .31. Shares last traded above .31 in 2006.
Caitlin Duffy is an equity options analyst at Interactive Brokers in Greenwich, Conn. Email: firstname.lastname@example.org