Elevated Trading in Rambus Options (RMBS)

Is Rambus Inc. (NASDAQ: RMBS) going to see a resolution to its never-ending patent case sooner than many of us expect?  Options trading is elevated today, and mostly in the Call options rather than the Put options.  Almost all of the activity is in the AUG-2010 Calls as well, at least two to one in favor of the Calls as of 2:00 PM.  There has also been no rolling out on dates that has been seen.

Below is the trading activity we have seen:

As far as the stock volume rather than options volume, shares are up 4.2% at $19.79 on just over 2.3 million shares.  That volume is just now reaching an average day’s trading volume in the stock and the 52-week range is $15.21 to $26.00.

Usually the call options trade around 2,000 contracts on a light day and closer to 5,000 on a normal day.  This implies that more focus is being put in the options arena than the stock arena today.

JON C. OGG

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Major Options Alert in US Airways (LCC)

US Airways Group, Inc. (NYSE: LCC) is the airline nobody wants, or so it seems, when it comes to an airline merger.  What if that notion is wrong?  US Airways shares are at $10.68 and the 52-week range is $2.25 to $10.87.  Exponential gains were available for those who took a stab and held on.  The stock was under $6.00 as recently as February.  There was a very unusual options alert that came off this morning in US Air’s stock via the AUG-2010 CALLS:

CALL$    Volume    OpInt
$9.00    4,447    17,288
$10.00    18,581    23,271
$12.00    34,183    859

What appears to have happened is that a trader locked in significant gains in the $10 strike call options for August.  The $9.00 calls may have been a part, but we did not see those as active until right before posting this notion.

A trader appears to have locked in major upside gains at more than $1.00 and rolled some of the profit proceeds into the higher $12.00 strike call options to keep some potential upside of US Air’s shares keep running.

Despite no major negative earnings reports from the major money center and super-regional banks in America, the Q2-2010 reports seen so far in this July’s earnings season has brought a mixed fanfare for the major US banking giants.

Generally speaking this is not a new speculation trade, but it can be indicative that a bullish trader still has some hope of a deal or further positive development.  Locking in gains and pressing part of the bet to stay positive (as we have just seen)  is still a better indication that taking the money off the table entirely.

JON C. OGG

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Genzyme Active On Continued Buyout Rumors (GENZ)

Genzyme Corp. (NASDAQ: GENZ) has made early gains as more rumors about the company and its potential buyers continues to surface. Shortly after the market closed friday, Sanofi-Aventis (NYSE: SNY) approached the biotech company with the explicit intention of considering purchase. GENZ is up 5.57% to $66 at 8:04 AM EDT. At that time the stock had traded 114 thousand shares volume with an average volume of 3.8 million.

Sanofi-Aventis is not the only Biotech company which has been speculated to have interest in Genzyme. GlaxoSmithKline (NYSE: GSK) and Johnson & Johnson (NYSE: JNJ) are also considered potential suitors.

-Michael B. Sauter

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ARM Holdings Set To Hit 52-Week High After Microsoft Licenses Technology (ARMH)

ARM Holdings plc (NASDAQ: ARMH) made premarket gains in excess of 10% after long-time partner Microsoft (NASDAQ: MSFT) signed a license agreement to utilize the company’s ARM® architecture as a multifunction technology in their business. at 8:25 AM EDT, ARMH is up 10.56% to $1.52 on only 46 thousand shares volume (2.9 million average volume). With a 52-week range of $5.91 to $14.98, ARM is set to hit a 52-week high this morning as the microprocessor intellectual property continues its almost uninterrupted rise for the past two years.

ARMH’s ARM® Arcitecture is used in more that a billion mobile devices worldwide.

-Michael B. Sauter

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Mellanox Loses Ground in Pre-Market Trading (MLNX)

Mellanox Technologies, Ltd. (NASDAQ: MLNX)  is down $4.24 (18.48%) at 8:35 AM EST to $18.70 and has already traded 95,265 shares.  This comes in the middle of the 52-week trading range of $12.90 to $27.48.  Mellanox features a market cap of $769.52 million.

This drop comes as a bit of a surprise considering the fact that Mellanox, a fabless semiconductor based out of Israel, announced yesterday record revenue in its fiscal second quarter 2010.  Nevertheless, stocks have been down throughout this week.

-Michael B. Sauter

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Global Cash Access Death Spiral Volume Alert (GCA)

Global Cash Access Holdings, Inc. (NYSE: GCA) is seeing a true death spiral.  An SEC filing shows that Harrah’s is not renewing its contract that expires at the end of November 2010. Harrah’s, by the way, happens to be GCA’s best customer.  At 10:30 AM EST shares were down 37% at $4.30 on almost 5 million shares.  There is an intra-day low print listed at $3.46, but that appears to be a market order that may have been well under the bid-ask at the time.  The stock opened at $6.51, so it has been a brutal day.

GCA’s market cap is now just under $290 million and the new 52-week trading range is $3.46 to $9.26.  The average volume here is only about 300,000 shares.

No stock options appear available in Global Cash Access.

Michael B. Sauter

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Top After-Hours Movers & Reactions (AAPL, BP, APA, CYT, GILD, SHLD, YHOO, VMW)

Many shares are moving in the after-hours trading session.  Most are earnings as earnings season is in full swing, but some are not tied to earnings at all.

Apple Inc. (NASDAQ: AAPL) closed at $251.89 and shares are up 2.9% at $259.14 on more than 4.57 million shares as of 5:05 PM EST.  SUMMARY

BP plc (NYSE: BP) and Apache Corp. (NYSE: APA) are on the move in after-hours trading.  BP is selling $7 billion in assets in the U.S., Canada, and Egypt to Apache to help pay for the Gulf of Mexico clean-up.  Apache Corp To Advance $5B To BP On July 30.  At 5;10 PM EST BP is up 1.25% at $35.64 on 665,000 shares in the after-hours session; Apache is down 2.8% at $85.77 and has traded 265,000 shares in the after-hours session.

Cytec Industries Inc. (NYSE: CYT) rose after record earnings of $1.24 EPS vs. $0.67 from Thomson Reuters consensus; It also raised guidance to $3.20 to $3.50 EPS from a prior range of $1.90 to $2.40 EPS for 2010.  Shares are up over 12% at $48.20 on about 34,000 shares as of 5:05 PM EST.

Gilead Sciences, Inc. (NASDAQ: GILD) is off lows after cutting its 2010 product sales guidance after earnings today.  Still, at 5:05 PM EST shares are down 3.03% at $32.00 on 375,000 shares since the close.

Sears Holdings Corporation (NASDAQ: SHLD) should be the “FAKE” after-hours alert.  There was either a clean-up trade that was not reported properly in time or a day traders and market maker have a beef over a print… Shares rose 4.5% to $64.80 in regular trading and a print of $60.95 for 8.685 shares at 4:51 PM EST has shares down by a mistaken amount considering the 5:05 PM EST bid-ask is much higher.

Yahoo! Inc. (NASDAQ: YHOO) closed at $15.20 before earnings and the reaction of light revenues has shares lower by 6.25% at $14.25 on more than 3.5 million shares as of 5:Z05 PM EST. SUMMARY

VMware, Inc. (NYSE: VMW) is running up after earnings and after raising 2010 guidance.  Shares are up 5.1% at $76.15 on over 600,000 shares as of 5:05 PM EST. SUMMARY

JON C. OGG

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80X VOLUME ALERT: VocalTec Wins on MagicJack (VOCL, CALL)

VocalTec Communications Ltd. (NASDAQ: VOCL) just became the biggest stealth stock in quite some time.  It almost feels like a SPAC because of the news. VocalTec and YMAX Corp., the creator of magicJack, have successfully merged and will be traded on the NASDAQ under the symbol “CALL” on Monday, July 16, 2010.

VocalTec expects to have revenues ranging from $110 million to $125 million this year. With over $40 million cash/securities on hand and no debt, VocalTec expects to show a profit in the current quarter.  The stock will also effect a 1-for-5 reverse stock split.

VocalTec was under a $10 million market cap company before the deal.  Now shares are up 155% at $3.37.  We have also seen over 800,000 shares trade hands with 20 minutes to go to the close, so it has seen 80-times normal volume.

JON C. OGG

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The Alcoa Indicator: Majors Rise in After-Hours (BA, CAT, CENX, F, GE, TIE, X)

Alcoa, Inc. is a stock that many investors and traders try to use as a proxy for earnings season for other major companies.  Of the companies which are large end-users of the metal (hence Alcoa’s comments about rising demand), we are watching Boeing Co. (NYSE: BA), Caterpillar Inc. (NYSE: CAT), Century Aluminum Co. (NASDAQ: CENX), Ford Motor Co. (NYSE: F), General Electric Co. (NYSE: GE), Titanium Metals Corporation (NYSE: TIE), and United States Steel Corp. (NYSE: X).  Of course not all of these are directly tied to Alcoa as far as the company itself, but the tie should be fairly evident.

The issue that always comes up for debate is that Alcoa is often a coincidental indicator rather than a leading indicator stock.  It is rare that things would be great or improving for Alcoa without the rest of the biggest companies following suit, but the rest of the universe can still be strong or holding up even if Alcoa is not scoring large gains.

Here are the after-hours reactions from the key DJIA components which would be loosely tied:

• Boeing Co. (NYSE: BA) up 0.7% at $64.34
• Caterpillar Inc. (NYSE: CAT) up 0.5% at $64.61
• Century Aluminum Co. (NASDAQ: CENX) up 3.75% at $9.95
• Ford Motor Co. (NYSE: F) up 1% at $11.21
• General Electric Co. (NYSE: GE) up 1%at $15.08
• Titanium Metals Corporation (NYSE: TIE) up 1.7% at $19.44
• United States Steel Corp. (NYSE: X) up 1.35% at $42.07

JON C. OGG

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Ahead of Alcoa Earnings: Speculators Mount Options Assault (AA)

Alcoa, Inc. (NYSE: AA) is to be the first of the 30 Dow Jones Industrial Average components reporting earnings this earnings season with results due after the close today.  Right after 2:05 PM EST we have shares trading down 0.7% at $10.87 on almost 26 million shares.  The real move is in the speculative options trading, and we’d be looking for those speculative CALLS to be bought even more going into the close when the intraday price trading risk becomes less and less in the stock.

The July options expire this Friday, and the following is what we have seen per speculative strike price along with the volume and open interest:

• 11.00 at $0.28: 14,371 traded vs. 26,091 open interest
• 12.00 at $0.06: 4,416 traded vs. 38,455 open interest
• 13.00 at $0.03: 1,458 traded vs. 41,860 open interest

The 52-week trading range is $9.04 to $17.60, and earnings estimates have come in sharply since the last pre-earnings.  The Thomson Reuters estimates for today are now ‘only’ $0.12 EPS.  The estimates were up at $0.23 EPS about 3-months ago.

After the sell-off we have seen in shares, from $14 to $10 before the latest week’s recovery, today’s stock options do not look too overpriced in a manner which would keep speculators on the sidelines.

JON C. OGG

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VIVUS Options Signaling Huge Move (VVUS)

VIVUS, Inc. (NASDAQL VVUS) shares closed up strong on the week with a 21% gain despite a somewhat soft move Friday.  An analyst call from Wedbush and a downgrade the following day ahead of the FDA review next week.  The difference is that Wedbush believes the stock is a potential double.  The biggest action is actually not even in the stock.  The stock options activity speaks wonders.  See below, with the call and put strike prices, the price, and the contracts traded versus the open interest:

CALL$        Contracts    O.I.
10.00 at $3.90   925    16,989
11.00 at $3.40     1,071    8,851
12.00 at $2.70     4,884    10,380
13.00 at $2.20   2,577    14,644
14.00 at $1.80   1,946    5,394
15.00 at $1.35     3,884    15,931
16.00 at $1.00     2,333    7,662
17.50 at $0.70   3,189    12,737
20.00 at $0.30     7,060    13,181
PUTS$       Contracts    O.I.
5.00 at $0.35     3,813    22,222
6.00 at $0.65    13,759    3,509
7.00 at $1.10     6,738    22,675
8.00 at $1.50      2,882    6,619
9.00 at $1.90     5,388    15,316
10.00 at $2.45     2,389    10,105
11.00 at $2.90     599    3,166
12.00 at $3.30     1,478    869

Making a synthetic speculative straddle with the $12 CALLS and the $11 PUTS for July shows just how expensive it is and how much of a move there could be depending upon the FDA panel review.

That synthetic speculative straddle would cost $5.60, meaning the stock would have to go under $5.40 or above $17.60… In short, the stock is apt to see a hell of a move this week.

JON C. OGG

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Allos Sees Options Alert (ATH)

Allos Therapeutics, Inc. (NASDAQ: ALTH) saw a rather unusual options trade today, and the move has not been mirrored nor echoed at all by the raw trading of the common stock.

Joe Kunkle of OptionsHawk.com just noted to us:

• “Alert with a buyer of 2,000 August $7.50/$5 put spreads for $1.85, a few days after the long term uptrend going back to 2006 was broken.  The Company received EU Orphan Status for its experimental cancer drug for cutaneous T-cell lymphoma back in June, but is in early stage trials.  The FDA also gave it orphan drug status for its bladder cancer drug in May.  Put volume is 12X average on the bear spread.  With many of its trials in early stages shares are falling out of favor with impatient investors despite the promising results, it could be susceptible to a capital raising at this pace.”

What is interesting is that 2,000 contracts is a bet of 200,000 shares if you count it on a fully leveraged basis.  We have so far only seen 303,000 shares trade hands by 1:23 PM EST today and the average volume is over 1.1 million shares.

When you see moves like this, it is generally a lone trade.  Whether or not it gets followed depends upon many factors.

Allos shares are actually up 1.8% at $5.65 on the day, and the 52-week range is $4.97 to $8.79.

JON C. OGG

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LeBron James Trade: Options Alert in Madison Square Garden (MSG)

Will basketball great LeBron James stay in Cleveland, or will he go packing for more money?  Personally, I could care less.  If you can imagine that a basketball player might be influencing a stock out there, imagine away.  Madison Square Garden, Inc. (NYSE: MSG) is fairly new as a stock because of the spin-off.  Its MSG Sports consists of the NBA’s New York Knicks, the NHL’s New York Rangers, the WNBA’s New York Liberty, and the AHL’s Hartford Wolf Pack.  The Knicks… one of LeBron’s potential or speculated destinations now that he is free to look elsewhere beyond Cleveland.

Options speculators are out in MSG today:

• JULY-2010 $22.50 CALLS have seen 6,500 contracts trade, versus an open interest of only 1,931 contracts.  There is elevated PUT volume as well as the JULY-2010 $20.00 PUTS have traded 3,113 contracts versus a mere open interest of 248 contracts.

UPDATE at 3:50 PM EST: JULY $20.00 CALLS have traded 1,895 contracts versus 831 open interest; JULY $22.50 CALLS have traded 8,989 contracts; JULY $20 PUTS have traded 3,937 contracts.

It seems that if there is a way to speculate, options traders always have their hands in it.

Madison Square Garden shares has also seen about twice-normal trading volume today against its 311,000 shares on average: shares are up 1.5% at $20.58 on over 600,000 shares with just over an hour until the closing bell.

Joe Kunkle of OptionsHawk.com said: “There is  bullish bias with the front month volatility skew betting on Lebron to the Knicks, but the largest trade bought 2000 July 22.5/20 strangles, just betting on a volatile reaction in shares to the news.  Multiple celebrities on Twitter, including Ocho Cinco are hinting at Lebron to the Knicks.”

Sometimes you hear the stock market being referred to as the same as gambling.  This is one of those examples.

JON C. OGG

Frontier Volume Shocks (FTR)

Frontier Communications Corporation (NYSE: FTR) is still on the most actives list for Volume Spike investors.  We have a 200% volume alert for a full trading day, yet there are not even two hours of trading since the market opened at 9:30 AM EST.  This looks huge but is actually lower than the last two days.  The problem is that today’s volume is light when you consider how much traded last week on what was otherwise a rather quiet trading period:

• JULY 2… 49,167,100 shares; $7.35 close.
• JULY 1… 30,407,200 shares; $7.69 close.
• JUNE 30… 12,362,300 shares; $7.11 close.

At 11:24 AM EST, FTR is down 2.45% at $7.17 on 17.7 million shares.  The 52-week range is $6.43 to $8.57 and the average trading volume is almost 6.4 million shares.

Just last week, the company closed on its $5.3 billion acquisition of phone lines in 14 states belonging to Verizon.

JON C. OGG

Short Interest Volume Spikes

We updated the major short interest changes on some of the most active cult stocks that are from listed penny stocks and low priced stocks based on June 15 settlement date changes from May 28.  Stock tickers are as follows:

• ALU, ABK, BBI, BGP, BRCD, C, DRYS, FRE, FNM, NOK, PALM, PMI, BPOP, RAD, SIRI, S, UNG, VG

Read full report at 24/7 Wall Street

BP Options Bets… Going to $10?

BP plc (NYSE: BP) is under fire, as if that is not the understatement of the decade.  While shares fell over 16% and were headed to close close to $29.00 today there was a hell of an options trading pattern in the PUT options.  BP had explosive options trading down all the way in the PUT contracts under $20 and even down to $10 and lower…. This is the data shortly before the closing bell just on the JUNE-2010 CALLS alone:

If you look, that is a first for options trading.  The prior open interest was listed as a whopping 5 contracts spread out among the $7.50 to $15.00 PUT strikes before today.  Many of these are sure to be just extremely low probability high-risk vs. high-reward scenarios.  Still, it will make you wonder….

JON C. OGG

Volume Spike on Patent Troll Alert: Rambus/Micron (RMBS, MU)

Rambus Inc. (NASDAQ:RMBS) has been weak for part of the trading day, although some of this data was assumed to be known after a prior delay.

The company has confirmed that it has received notification from the U.S. Court of Appeals for the Federal Circuit ordering the rehearing of arguments to take place on October 7, 2010, following an initial hearing held in April 2010 in the cases with Hynix Semiconductor and Micron Technology Inc. (NASDAQ:MU).

All Rambus’ general counsel noted was as follows: “In spite of this delay, we remain confident in our position. We will vigorously argue our right to defend and be fairly compensated for use of our patented innovations borne of years of work by Rambus scientists and engineers.”

Rambus At 1:30 PM EST we have Rambus shares down 13% at $19.05 on 9.6 million shares, versus an average volume of less than 2 million shares and versus a trading range today of $18.93 â€" $22.75.  Micron is up 3.15% at $8.81 on 16.7 million shares, which is actually fairly low trading volume for when it has big news.

JON C. OGG

TiVo Losing More Edge (TIVO, DISH, SATS)

TiVo Inc. (NASDAQ: TIVO) is down after it is having to explain another patent office ruling…. It appears as though that decision that went against TiVo in favor of DISH Network Corporation (NASDAQ: DISH) and EchoStar Corporation (NASDAQ: SATS) is holding.

TiVo shares in the minute before the closing bell are trading down 5.5% at $7.70 on over 10 million shares right at the 4PM Closing Bell, which is mostly from the headline effect of the last five or six minutes.  DISH shares closed up unofficially by 0.25% at $19.97 and SATS shares closed up unofficially by 1.1% at $20.50.  It seems that almost all hope for TiVo had eswcaped based on its poor performance and shares hitting a new 52-week low today.

TiVo offered the following statement on the United States Patent and Trademark Office (PTO) decision.

“While TiVo is disappointed with this recent PTO office action, this is just one of several steps in the review process. We will continue to work with the PTO to explain the validity of the claims under review. It is important to note that TiVo received a “final action” holding several claims invalid during EchoStar’s first reexamination request at this juncture only to have the PTO ultimately uphold the validity of all claims of the patent.

Moreover, the PTO proceeding is separate and apart from the ongoing litigation against EchoStar and does not impact the current United States Court of Appeals en banc review of the district court’s finding of contempt against EchoStar and the related injunction.”

DISH Network L.L.C., a subsidiary of DISH Network Corporation (Nasdaq:DISH â€" News), and EchoStar Technologies L.L.C., a subsidiary of EchoStar Corporation (Nasdaq: SATS) made the following statements:

“We are pleased the Patent and Trademark Office issued a Final Office Action maintaining its rejection of the software claims of TiVo’s patent. These software claims are the same claims that EchoStar was found to have infringed in the contempt ruling now pending for en banc review by the Federal Circuit. In the Final Office Action, three examiners of the PTO considered TiVo’s response and, in a detailed 32-page decision, finally concluded that the software claims were unpatentable in view of two prior art references.”

JON C. OGG

Tellabs Volume Spike: Research to Rumor (TLAB, T)

Tellabs Inc. (NASDAQ: TLAB) is getting hit today due to a research call out of Barclays.  The call is having enough impact that it became acting just like a stock rumor…. Barclays cut its price target down to $7.00 from $9.50, and shares are adjusting for the drop immediately as Barclays noted that AT&T Inc. (NYSE: T) may be dropping much of its vendor business with Tellabs in a vendor consolidation move that could cost TLAB 5% to 10% of its revenues.  At 2:00 PM EST we have shares down over 11% at $6.97 on more than 27 million shares.

Believe it or not, this is already nearly triple an average day’s volume of almost 9.5 million shares.  The 52-week range is $4.96 to $9.45.

JON C. OGG

Apple Options Leading Shares in Upside Exposure (AAPL)

Traders are back to using stock options in Apple Inc. (NASDAQ: AAPL) for getting exposure to the price moves rather than the stock it seems.  We ran a snapshot of the options trading versus the stock trading today at 2:00 PM and the data is pretty obvious that there seems to be speculators in the name around the news of better than expected iPad sales.   Much of the gains may also be on follow-on bullish trading from the $310 to $400 analyst call last week.

Using options for high-priced shares is no new event.  But it is always interesting when you see the fully leveraged amount of options when converted into a share equivalent.  This is even more interesting when you consider that options buyers are out speculating in contracts with a strike price of $300 and higher in the CALLS.

For the June-2010 Calls around 2:00 PM EST, Apple’s more active contracts in the $230 to $310 strikes in the CALL options was more than 95,000 contracts.  The PUTS for June had over 47,000 contracts traded.  On a fully leveraged basis, that is over 9.5 million shares equivalent in the Calls and 4.7 million shares in the Puts.  Considering taht Apple was right at 20 million shares at 2:00 that is very active options trading.

Go out to July-2010 expirations and the most active calls was nearly 40,000 contracts traded, almost another 4 million shares equivalent on a fully leveraged basis.  And in July, the active  Call options went all the way out to $310 and $320 strike prices.  That is obvious that traders and speculators are using leverage for upside exposure in the name at $1.00 to $2.00 per contract rather than paying over $260 per share.

Shares are now up 2.6% at $263.55 on the day.

JON C. OGG