- The VIX spiked by nearly 5%. Investors were definitely reaching for protection on the back of today’s losses.
- Dr. Copper has remained relatively unfazed by the recent skittish action in stocks. December copper closed down 0.5% compared to 1%+ losses for most equity markets.
- Options action in shares of Intermune (ITMN) caught our eye today as some investors placed trades expecting as much as a 50% rise in shares in the next 6 months.
ITMN – InterMune, Inc. – A bull call spread on the biotechnology company today suggests shares could rally significantly by expiration in April 2010. Bullish options activity on the stock belies the more than 3% decline in ITMN’s shares during the session to $10.94. The call spread involved the purchase of 3,750 calls at the April 15 strike for an average premium of 2.25 each, marked against the sale of the same number of calls at the higher April 25 strike for 75 cents apiece. The net cost of the transaction amounts to 1.50 per contract. The optimistic investor is positioned to amass maximum potential profits of 8.50 per contract if shares of the biotech firm explode up to $25.00 by expiration in April. Shares must rise at least 50% in order for the investor to breakeven at $16.50. The stock traded higher than the breakeven price on September 18, 2009, when shares were at $16.91. Finally, we note that shares of ITMN have not breached the $25.00-level since July 18, 2007.
- Goldman Sachs downgraded shares of ASM International (ASMI) from their conviction buy list to neutral.
- Piper Jaffray downgraded shares of Hot Topic (HOTT) to underperform.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.