FMG calls eyeing $5.50

by Raymond Chan

For week ended 10 Feb 2012, FMG low/high was $5.15 – $5.47

FMG had a strong week rising 3.35% last week.

It was also a big week in options for FMG, especially on the calls side. Weekly call volume was 6 times more with puts, with put volume having remained the same. Traders were playing the upside on the share via calls.

Interest seemed to have been centred on a particular strike, the Feb $5.50 calls. There were active buying and selling of the series through out the week. Total contracts traded in the Feb $5.50 calls for the week was 57,000, 26% of total calls traded, especially during Monday and Wednesday last week when FMG peaked for the week at $5.47.

The $5.50 level is now also the largest Open Interest in Feb. With the stock reporting on Wednesday (15th Feb) and analysts expecting a strong result, $5.50 is key. Looking at Implied Volatility for some indications, it seems like calls IV are much higher than puts as well, the Feb ATM 525 calls IV are at 40 vs the puts at 32, showing the popularity of calls. Moreover, protection via puts did not seem top of mind or sought after in the stock last week.

The trading pattern on the stock seems to be throwing up the question, “is FMG likely to break above $5.50 this week, with results being the catalyst?”

Well, for those who like a punt, weakness in the stock early in the week may present some opportunities!


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