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Intel shares jumped 4.3 percent in after-hours trading. Mitsubishi UFJ sank 3.4 percent to 484 yen, the biggest single drag on the MSCI Asia Pacific Index. ...
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Options traders are making, and have been making, a very large bet using Citigroup, Inc. (NYSE: C) stock options that is technically a very low risk bet if done on a de-leveraged basis. It is almost very similar to a Citigroup Lotto Ticket.
October stock options expiration date in only about 75 hours away for this Friday. With the stock itself being such a low-priced stock, many might be shocked about the call and put options trading seen here.  The stock is up 1.5% today at $4.845 on almost 300 million shares as of 1:10 PM EST. But the OCT-2009 $5.00 CALLS have seen some 89,503 contracts trade versus an open interest of some 791,234 contracts. The last trades were at $0.11 and the market on this one is listed as $0.10 X $0.11.
In short, this lotto ticket pays off only if shares go north of $5.11 (plus transactional fees). But if traders are only buying one contract per 100 shares for the exposure to any big earnings upside, then they are actually taking less event risk than stock traders. It would be easy to imagine that Citi shares could fall more than $0.11 if the news is atrocious. Merely having a stop loss during market hours won’t protect those traders who have on a theoretical $4.50 stop loss if this were to gap down significantly.
As always, out of the money options expire worthless at each options expiration date. So calling this a lower-risk trade only applies if traders are using the de-leveraged trade. Options of this sort are 100% purely for risk-based capital. And as far as lotto tickets, the odds are directly at an inverse proportion to the potential reward….
JON C. OGG
Starent Networks, Corp. (NASDAQ: STAR), multimedia hardware/software player, is being acquired by Cisco Systems (NASDAQ: CSCO) for some $2.9 billion versus a $2.08 billion market cap based on Monday’s $29.03 closing price. The deal is an all-cash buyout and the buyout price is $35.00 per share in a deal which companies have approved and which is expected to close in the first half of 2010. Trading has been halted all morning and the stock was freed up to trade at 9:45 AM EST. At 9:54 AM EST we have over 6.2 million shares traded and the stock is up 18% at $34.30. Starent trades 1.6 million shares on average and its 52-week trading range is $7.30 to $30.00. The $35 buyout price is an all-time high that has never been seen since its 2007 IPO.
JON C. OGG
Goldman Sachs Group Inc. (NYSE: GS) is getting hit ahead of earnings as analyst Meredith Whitney has come out and downgraded the stock to Neutral from Buy after shares have run up over 30% since her Buy recommendation. It is surprising that the volume is not more and that the reaction is not more as well.  We have shares down 1.8% at $186.70 on over 120,000 shares as of 8:52 AM EST. Shares rose much more than this when she initiated the buy rating. In a bull market it seems easier to add than to take away. JON C. OGG