Today’s tickers: BA, CSCO, TIN & TEVA
BA – Boeing Co. – Boeing’s shares may be headed for the stratosphere or ready to crash and burn over the next few months according to the buyer of a sizable long strangle on the producer of commercial jetliners today. Shares in the Chicago, IL-based company are up 0.90% at $76.27 in early-afternoon trade, recovering up from earlier losses following disappointing April durable goods data. The strangle-strategist it seems is at least looking for implied volatility on the stock to climb if not the actual price of the underlying shares. The trader purchased approximately 7,500 calls at the August $85 strike for a premium of $0.56 each, and purchased the same number of puts at the August $65 strike at a premium of $0.88 a-pop. Net premium paid to initiate the strangle amounts to $1.44 per contract, thereby preparing the trader to make money should the stock swing sharply in either direction away from the current price. Profits are available on the upside at expiration if the stock is trading above the upper breakeven point at $86.44, while profits on the downside require shares trade below the lower breakeven point at $64.56 at expiration. Boeing’s shares would need to jump 13.3% higher, or drop 15.4%, from the current price to break-out of either point in the next few months. But, as mentioned previously, the stock need not move at all for the buyer of the strangle to benefit from the position. What is required are rising expectations of turbulent days ahead for BA’s shares, in other words, higher implied volatility. The combined value of the call and put options should increase if implied volatility on Boeing climbs going forward. The investor may be able to sell the strangle ahead of expiration for more than the $1.44 per contract required to purchase the position today given favorable moves in the level of volatility on the stock. Boeing reports second-quarter earnings on July 27 ahead of the opening…
