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Jud Pyle discusses Emulex Corp. (ELX) and NVIDIA Corporation (NVDA).
Notable Options Volume in Emulex (ELX) and NVIDEA (NVDA)
June 30, 2009
Jud Pyle, CFA Chief Investment Strategist, www.ONN.tv
Part one of Tuesday’s "Sidewinders: Option Volume vs. Open Interest" series, shot on location at the Chicago Board Options Exchange (CBOE), covers interesting early-session option trading in two semiconductor companies: Emulex Corporation (ELX) and NVIDEA Corporation (NVDA).
Emulex Corporation (ELX)
ELX has dropped 8% today to $9.97, falling into single-digit territory. Options players are honing in on two strikes – the August and July 10 puts. The August put has seen 6,700 contracts trade while the front-month 10 strike has seen volume of more than 23,000 already today versus open interest of 17.000. The July puts closed at 10 cents last night and are trading at 64 cents already today. The August puts have rallied from 10 cents to $1.10 today as implied volatility spikes.
Emulex News: Emulex is in the semiconductor business but focuses on the storage and server connections end of the market. Broadcom (BRCM) had made an offer for the company at $9.25 per share, which ELX turned down. BRCM today increased the offer to $11.00 in cash. The offer is good through midnight on July 14. The market was obviously looking for a bigger number, accounting for today’s pullback in ELX shares.
NVIDEA Corporation (NVDA)
NVDA shares are down 3.2% in early trading today. Investors are trading the front-month July 11 put; nearly 20,000 contracts have gone off at this strike at about 50 cents per contract. These puts closed at 28 cents on Monday. With the stock only down 37 cents, it is apparent that implied volatility is creeping up. The July 11 straddle is trading at $1.12, on par with last night’s close (in other words, no time decay on this spread suggests higher implied volatility).
NVIDEA News: NVDA’s niche in the semiconductor market is 3D graphic processing chips. The company held an analyst day in mid-June but there is not much news since then, although there are a few stories out today about the potential for a phone to be launched in 2010 that would run on NVDA’s Tegra processor.
For more breaking developments in the options market, stay tuned in to www.ONN.tv. Thanks for watching!
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