Tuesday Options Update: BA, RMBS, ZMH & YHOO

Boeing Co. (BA) – Investors in the world’s second-largest commercial-plane maker are probably feeling less than overjoyed today amid a more than 8% decline in shares to $42.90. The company’s stock dropped after it announced further delays for its new Dreamliner 787 model. Reports from the Paris Air Show one week ago had Boeing’s new model flying before the end of June. However, representatives at the Chicago-based firm announced today that the airliner, which is already two years behind schedule, has been delayed beyond the June 30 target date. Option traders were observed buying put options on BA in the expectation of continued bearish movement in the stock. The July 43 strike price had approximately 3,000 puts picked up for 1.65 apiece while the more bearish July 42 strike had 1,700 puts purchased for 1.29 per contract. The nearer to-the-money July 43 puts will protect investors to the downside beginning at the breakeven point of $41.35. Option implied volatility has increased from yesterday’s reading of 42% to the current value of 46%.

Rambus Inc. (RMBS) – Shares of the computer memory chips designer have plummeted more than 14% today to $15.33 after the firm cut its second-quarter revenue forecast. The Los Altos, California-based company announced that sales will likely range between $26.7 million and $27.2 million. The revised estimate is down from original sales guidance of $30 million for the quarter and is likely due to declining demand for consumer electronics. Option traders looked for downside protection and appear to be anticipating further erosion in the share price. The near-term July contract had approximately 1,000 puts scooped up at the July 13 strike price for 25 cents apiece. Downside protection for investors long of these put options will kick in beneath a share price of $12.75. Additional put buying occurred at the higher July 14 strike price where nearly 2,000 lots were purchased for 54 cents per contract.

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[Source: SeekingAlpha.com: Home Page]