Options investor sells Comcast Corp. strangle

CMCSK – Comcast Corp. – The use of a short strangle on the provider of video, high-speed Internet and phone and cable services suggests one strategist expects the price of the underlying stock to remain range-bound through August expiration. Comcast’s shares inched 0.75% higher during the first half of the session to arrive at $17.70 just before 11:35 am ET. One options trader appears to have sold 4,000 calls at the August $18 strike for a premium of $0.15 each in combination with the sale of 4,000 puts at the lower August $17 strike also for premium of $0.15 apiece. Gross premium pocketed by the strangle-seller amounts to $0.30 per contract. The investor keeps the full premium received on the sale as long as Comcast’s shares trade within the range of the strike prices described through expiration day. The trader is exposed to potentially devastating losses should shares fail to settle within the specified range. Losses start to accumulate if the price of the underlying stock rallies above the upper breakeven price of $18.30, or if shares slip beneath the lower breakeven point at $16.70, ahead of expiration.

MYL – Mylan, Inc. – The global pharmaceutical company that develops and distributes generic, branded generic and specialty pharmaceuticals popped up on our ‘most active by options volume’ market scanner today after one options player sold a large chunk of August contract calls. Mylan’s shares are up nearly 2.00% to $18.00 as of 11:45 am ET after its shares were upgraded to ‘outperform’ from ‘market perform’ with a 12-month target share price of $22.00 at Sanford Bernstein. Despite the bullish move in share price and the ratings upgrade, one investor sold into the rally, shedding approximately 18,500 calls at the August $18 strike for premium of $0.30 per contract. Perhaps the responsible party is long an offsetting number of shares of the underlying stock, and is thus selling covered calls to take in available premium. If this is the case, the investor is willing to have the underlying shares called from him at $18.00 each. Conversely, if the trader is not long the underlying stock, the sale of the calls is an unlimited risk strategy that could result in substantial losses. In this scenario, the investor starts to incur losses if Mylan’s shares rally above $18.30 and the calls of which he is short are uncovered. Options implied volatility on MYL slumped 7.5% lower to 28.92% by 12:00 pm ET.

DELL – Dell, Inc. – The just-in-time manufacturer of personal computers attracted bearish options players during the session with shares of the underlying stock edging 0.60% lower to $13.04 by 12:15 pm ET. Pessimists picked up 1,100 puts at the August $13 strike for an average premium of $0.35 apiece. Investors buying the puts outright make money if Dell’s shares fall another 3.00% to breach the average breakeven point to the downside at $12.65 by August expiration. Bearish sentiment spread to the September contract where traders were seen selling in- and out-of-the-money call options. It looks like some 3,200 calls were sold at the September $13 strike for an average premium of $0.60 each. Investors may be throwing in the towel on previously established long call positions, or could be engaging in outright call selling. Traders selling the calls outright walk away with the full $0.60 premium in hand as long as the price of the underlying stock is less than $13.00 at expiration. More pessimistic individuals expecting shares to decline significantly by expiration day next month sold approximately 3,900 in-the-money calls at the September $12 strike for premium of $1.29 per contract. There are only 360 lots of open interest at that strike, which indicates today’s volume is all new activity. In-the-money call sellers keep the full $1.20 premium received today only if Dell’s shares fall 8.00% from the current price of $13.04 to trade below $12.00 by September expiration.

ZGEN – ZymoGenetics, Inc. – Shares of the biotechnology company engaged in the development of therapeutic proteins to combat life-threatening illnesses are up 5.9% to stand at $4.32 as of 11:25 am ET. It looks like one options investor populating the November contract today expects ZymoGenetics’ shares to continue to improve in the next several months. The trader appears to have sold 1,500 in-the-money puts at the November $5.0 strike to take in premium of $1.05 per contract. The put seller walks away with the full premium in his wallet as long as ZGEN’s shares surge 15.75% over the current price of $4.32 to trade above $5.00 by expiration day in November. The biotechnology firm’s shares last exceeded $5.00 back on May 26, 2010. The sale of the put contracts implies the trader is willing to have shares of the underlying stock put to him at an effective price of $3.95 each if the puts are in-the-money at expiration.