Uranium company sees calendar call spread
Today’s tickers: CCJ, BAX, XHB, T, VIX, PCP, PG, JNJ, HIG & USO CCJ Cameco Corporation – The producer of commercial-use uranium to fuel nuclear power plants has experienced a share price decline of about 4.5% to $17.08. According to one news source, uranium-oxide concentrate for immediate delivery rose 2.5% or $1, to $41.50 per pound last week, although uranium spot prices have declined by more than 26% since December 1, 2008. Additionally, trading last week jumped to more than 4.3 million pounds up from just 2.2 million pounds in the first three months of the year. CCJ edged onto our ‘hot by option volume’ market scanner after one investor initiated a calendar spread. Perhaps with revived demand for uranium and trading volume for the commodity on the rise, this investor is hoping that CCJ’s share price will receive a boost in the next six months. The trader purchased 7,500 calls at the September 22.5 strike price for an average premium of 52 cents per contract. The long call position was funded by the sale of 7,500 calls at the January 2010 22.5 strike price for 1.15 apiece. The investor receives a credit of 63 cents on the trade and is hoping shares rally through $22.50 by expiration as he would then be able to exercise the call options and take delivery of the underlying shares. The fact that the sooner-to-expiration September calls have a higher gamma means that its premium will rise faster for a given rally in the underlying share price. On the flip side, the investor could see the credit pocketed today erode if the calls fail to land in-the-money by expiration in September. We’re unsure what the investor will do with this strategy should shares rally but not far enough to allow September exercise – an event that would leave him short of calls after expiration. BAX Baxter International, Inc. – Shares have dipped by about 1.5% to $50.95 for BAX, a company that develops, manufactures, and markets products that aid persons with hemophilia, immune disorders, infectious diseases and other chronic and acute medical conditions. A complex combination trade took place that grabbed our attention, but the trade is likely marked inaccurately on the exchange. The trade shows the sale of twice as many calls purchased, which makes little sense and so we’ll describe the way we think the trade went. Using the May contract an investor possibly initiated…
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