Today’s tickers: CAH, GLD, DOW, MA, FXI, NTAP, AET, STI & SLV

CAH– The Ohio-based healthcare company has experienced a more than 11% decline in shares to $32.50 after its earnings forecast for 2010 came in below analyst expectations. The fact that CAH upped its quarterly dividend to 17.5 cents per share – an increase of 25% – did not appear to have slowed the bearish decline any in the stock today. One option trader does not expect much of a recovery in the long-run as he was observed selling a strangle in the December contract. The transaction involved the sale of 6,000 puts at the December 30 strike price for a premium of 2.43 apiece as well as the sale of 6,000 calls at the December 35 strike for about 1.84 each. The gross premium taken in by the investor amounts to 4.27. The trader will retain the full premium as long as shares remain ‘strangled’ by the strike prices described above. Otherwise, the premium will begin to erode if shares move in either direction beyond the strike prices. He will be penniless if shares breach either breakeven point located at $25.73 to the downside and at $39.27 to the upside. The strangle appears well positioned as the stock would need to fall through the 52-week low of $27.51 before the investor faces losses to the downside. Losses to the upside would require a significant rally of about 21% by expiration. – Cardinal Health, Inc.

GLD – Bullish option traders dominated the January 2010 and 2011 contracts on the gold ETF today amid a rally of less than 1% to $96.39. The nearer-term January 2010 contract attracted one trader who appears to have established a covered call by selling 15,000 calls for a hefty premium of 5.80 each at the January 110 strike price. This position allows him to effectively purchase the underlying shares for $90.59 because of the premium he has received for writing the call options. He is now long the stock and short the calls. The short call position provides an exit strategy to the trader who will have realized gains of 21% if the shares are called from him by expiration next year. Another GLD-bull extended optimism one year further and chose to sell 8,000 puts short at the January 2011 95 strike price for a sweet premium of 13.98 per contract. The investor receives the rich premium…
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