Shares In Amylin Plunge, Options Players Prep For A Rebound

Amylin Pharmaceuticals, Inc. (AMLN)�C Sharesin the biopharmaceutical company plunged 18.1% to an intraday low of$8.95 on Tuesday on news the company ended its diabetes partnership withdrug maker, Eli Lilly & Co. Options activity on AmylinPharmaceuticals, however, suggests some strategists see the selloff asoverdone, with a number of investors stepping up today to position forthe price of the underlying to rebound. Near-term bulls snapped up morethan 1,650 calls at the Nov. $11 strike for a premium of $0.22 apiece.Buyers of the call options profit at expiration if shares in AMLN surge21.4% over the current traded price of $9.24 (as of 11:50 am in NewYork), to surpass the average breakeven price of $11.22. Optimism for anAMLN-recovery story spread to the Dec. $10 strike, where more than5,600 call options changed hands against open interest of 270 contracts.It looks like one investor purchased the majority of these calls for anaverage premium of $0.85 a-pop. The strategist profits at expirationnext month in the event that Amylin's shares increase 17.4% to tradeabove $10.85. Longer-dated contracts are the most active in terms ofvolume on the drug maker so far today. One trader appears to havepurchased a 5,000-lot April 2012 $10/$15 call spread for a net premiumof $1.30 per contract. The call-spreader may reel in profits of up to$3.70 per contract on the position if AMLN's shares jump 62.3% to exceed$15.00 by April expiration day. Meanwhile, the sale of 9,000 puts for apremium of $0.63 per contract at the April 2012 $6.0 strike suggests atleast one investor expects the price of the underlying to exceed thatlevel through expiration next year. The trader walks away with thepremium in hand as long as the put options expire worthless at Aprilexpiration day. We note that while much of the activity in Amylinoptions is likely bullish, the stock was not exclusively populated withbullish players. Some of the volume generated in April 2012 contractcalls looks to have been sold by traders betting! against the likelihoodof steep double-digit gains the shares. Additionally, light put buyingthe front month indicates other investors are prepared to see the stockpull back further ahead of November expiration. Options impliedvolatility on AMLN is up 46.7% at 85.0% just after midday on the EastCoast.

Xilinx, Inc.

(XLNX) �C Renewedtakeover chatter, as reported by theflyonthewall.com, spurred tradingin Xilinx call options this morning, and helped shares in the chipmakerearlier rise 2.0% to an intraday high of $33.64. The stock gave upearlier gains, and presently trades 0.10% lower on the day at $32.94 asof 12:20 pm in New York. Trading traffic in XLNX call options isheaviest in the front month, where the Nov. $34 strike call changedhands more than 5,600 times against open interest of 583 contracts. Itlooks like most of these calls were purchased for an average premium of$0.43 each. Buyers of the call options may profit at expiration nextFriday in the event that Xilinx's shares increase 4.5% over the currentprice of $32.94 to exceed the average breakeven point on the upside at$34.43. Investors exchanged some 2,800 calls at the higher Nov. $35strike against open interest of 336 positions, but trading at thisstrike was initiated by both buyers and sellers for an average premiumof $0.18 apiece. Sellers of the call options keep the full amount ofpremium received as long as XLNX shares fail to rally above $35.00 atexpiration day, while buyers of the contracts lose the premium paidunder this scenario. Finally, Dec. $36 and $37 strike call optionsattracted greater-than-normal volume in the first half of the session.Trading in the Dec. contract calls was mixed, as well.

Dean Foods Co. (DF) �C Thefood and beverage provider's shares are up 3.85% at $10.55 inearly-afternoon trade, ahead of the company's third-quarter earningsreport before the opening bell on Wednesday. Heightened activity inDecember contract calls this morning suggests one player is positioningfor the price of the! underly ing to continue to climb ahead of expirationnext month. Dean Foods Co. was raised to ��Overweight' from ��EqualWeight' with a share price target of $13.00, up from $11.00, at Stephenstoday. It looks like one investor was responsible for much of thevolume printed in Dean Foods calls in the first half of the session. Thetrader appears to have purchased 3,325 calls at the Dec. $11 strike foran average premium of $0.52 per contract. Profits may be available tothe investor on the position in the event that the dairy processor'sshares surge 9.2% to trade above the average breakeven price of $11.52by December expiration. Shares in the Dallas, Texas-based company lasttraded above $11.52 back in July.

Netgear, Inc. (NTGR) �C Themaker of networking products popped up on our ��hot by options volume'market scanner this morning due to greater-than-usual activity inNetgear calls. Shares in NTGR surged 8.8% to an intraday high of $38.35today, and it looks like a number of options players are prepared toprofit should the stock continue its run higher in the near term.Investors traded 399 calls at the Nov. $39 strike against zero openpositions, and appear to have purchased most of the contracts for anaverage premium of $0.68 apiece. Traders long the calls may profit atexpiration if Netgear's shares rally another 3.5% over today's high of$38.35 to surpass the average breakeven point at $39.68. Bulls purchasedanother 191 calls at the higher Nov. $40 strike, and picked up 111calls at the Nov. $41 strike, for average premiums of $0.43 and $0.28each, respectively. Netgear is scheduled to participate in the GoldmanSachs Small Cap Technology 1 on 1 Conference on Thursday in SanFrancisco, California.

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