STOCKS NEWS US-Weak dollar spurs gold option plays-analyst

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1403 ET 29May2009 Falling dollar stirs rising gold option plays-analyst
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Option traders are stepping up their bullish bets in the SPDR Gold Trust
(GLD.P), the world's largest bullion-backed exchange-traded fund, on the view
that the price of gold will keep on rising in the face of a weaker dollar
coupled with rising bond yields, said Interactive Brokers Group market analyst
Andrew Wilkinson. The analyst noticed that the GLD June contract had a
$100/$105/$110 call butterfly trading for 50 cents on a big combination
involving the sale of 30,000 calls in the body and half of that amount bought
at the surrounding wings. This investor would benefit most should the price of
shares in the ETF settle at $105.00 at June's expiry, he said.

A far more bullish trade indicates one investor's belief that gold's rally
will be sustained through year-end, seeing prospects for a rise above at least
$1,200 per ounce, he added. An investor placed a large bull call spread in
purchasing 16,000 December $120 strike calls, while selling the same amount of
calls at the $140 strike. The break even for that trade would require GLD
shares to rise to $121.77 by December expiration, based on today's GLD share
price of about $96.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1334 ET 29May2009 Star Scientific calls heat up, shrs rally
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Option investors sent out bullish smoke signals on Star Scientific
STSI.O, a technology-oriented tobacco company which develops dissolvable
smokeless tobacco products with fewer carcinogenic toxins, said Andrew
Wilkinson, senior market analyst at Interactive Brokers Group. Its shares
surged 15.55 percent to $5.50 after hitting a new 52-week high of $5.89 in
afternoon trade. Star's jury trial in its patent infringement lawsuit against
RJ Reynolds Tobacco Co continues in Maryland and investor uncertainty remains
high with option implied volatility at 224 percent, he said in a note.
Investors looking for more bullish movement in Star got long of more than 5,600
calls at the July $10 strike price for an average premium of 45 cents each.
"Perhaps such optimistic positioning stems from speculation that the firm will
win its appeal and send shares soaring more than 87 percent through the break
even point at $10.45 by expiration," he said. He noted the purchase 2,500 calls
at the June $7.50 strike price for 77 cents apiece.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1321 ET 29May2009 Some bullish players seek Marathan calls
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Option volume in integrated oil and gas producer Marathon Oil Corp (MRO.N)
is three times the norm with about 21,000 calls changing hands vs. 2,308 puts,
according to Trade Alert. Its shares were up 57 cents to $31.58 as crude oil
prices rose to a six-month high above $66 per barrel on Friday. The stock looks
like it has broken out or at least bounced off support levels, said
optionMonster founder Pete Najarian in comments on the firm's Website.
Optionmonster's computer model showed that earlier in the session, the July
$32.50 and $34 calls traded in large blocks for premiums of $1.55/$1.60 a
contract and $1.05 a contract, respectively, totaling 12,000 lots -- activity
that grabbed attention. Marathan has been strong and looks like the
institutional buyers expect the strength to continue, he said. WhatsTrading.com
option strategist Frederic Ruffy said some of the activity was due to one trade
where an investor sold 4,900 July $32 calls for $1.575 and also bought 7,200
July $34 calls for $1.05. The trade possibly closes out the $32 call position
while opening a similar long position in the $34 line.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1137 ET 29May2009-Savient options trades reflect expectations of volatility
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Interest in Savient Pharmaceuticals (SVNT.O) continues for the second
straight day in the options market as its shares jumped 8.7 percent to 6.25.
The equity's option implied volatility remains elevated at 250 percent in
anticipation of a review of its novel biological drug treatment for failure
gout patients. Savient's biologics license application for Krystexxa as a
therapy for patients with refractory gout is set for review before the FDA
Arthritis Advisory Committee on June 16. "Today's options trades reflect
expectations for heightened volatility in Savient shares as one player recently
bought 2,500 June $2.50 put-June $10 call strangles while another bought 8,100
July $10 calls for 70 cents (a contract)," said WhatsTrading.com option
strategist Frederic Ruffy. On Thursday, some investors established covered
calls, said Andrew Wilkinson, senior market analyst at Interactive Brokers
Group.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1113 ET 29May2009-Traders snap up Star Scientific call options
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Option traders are loading up on Star Scientific STSI.O call options,
with many hoping to catch extended gains as its shares rose 82 cents to $5.58
in morning trade. The stock has been rallying since Thursday afternoon, when
Star was up nearly 27 percent. "There is no company specific news to explain
the action, but note that Star is engaged in a lawsuit charging that RJ
Reynolds infringed on its patents covering a carcinogen-lower process for
curing tobacco," said WhatsTrading.com option strategist Frederic Ruffy. He
noted that bearish option flow infected Reynolds American (RAI.N) late on
Thursday. Trading is brisk in Star with about 22,000 calls traded or nearly 12
times the number of puts, according to Trade Alert. The out-of-the-money July
$10 calls are leading the flow. Star said earlier this month that a jury trial
in its patent infringement lawsuit against Reynolds Tobacco will start with
jury selection on May 18 and expects the trial to last about three weeks.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1031 ET 29May2009 Players eye GM June $1 puts, June $2 calls
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General Motors Corp GM.N shares fell 22.1 percent to 87 cents ahead of a
government-imposed Monday deadline to achieve restructuring or face bankruptcy.
The automaker's June $1 puts and June $2 calls have become very popular as
players jockey for position ahead of the news. More than 46,700 contracts
traded in both contracts, Reuters data show. The stock's option implied
volatility edged down to 411 percent from 417 percent and remains extremely
elevated, reflecting uncertainty, said WhatsTrading.com option strategist
Frederic Ruffy. Earlier, investors paid a premium of 56 cents per contract for
the June $1 put, which has a potential payoff of 44 cents if GM shares go to
zero, Ruffy said. In all, about 59,000 puts and 58,000 calls traded in GM,
according to Trade Alert. Sentiment based on option order flow is 62 percent
bearish, 26 percent neutral and 22 percent bullish.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
1017 ET 29May2009-US STOCKS SNAPSHOT-Wall St little changed after data
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U.S. stocks were little changed as investors assessed the health of the
economy through a slew of data, including regional business activity and
consumer sentiment.

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Reuters Messaging: caroline.valetkevitch.reuters.com@reuters.net
1005 ET 29May2009-Goldman recommends selling Petrobras puts
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Sell October puts in Brazilian state-run oil company Petrobras SA
(PETR4.SA) (PBR.N) for attractive yield and entry prices, said Goldman Sachs
derivatives strategists in note this week. Recent inventory data and signs of
stabilization in U.S. demand limit the downside risk and reinforce the bullish
outlook. "While near-term risks from a potential pullback in oil prices or
reduction in domestic gas prices remain, we view weakness as an attractive
buying opportunity," they said. "Option prices have moderated, but put-call
skew remains high, likely due to those concerns, rewarding investors for
committing to buy shares on weakness." The equity's option implied volatility
has declined but is still 20 points above 2007 levels while skew is up over the
past month despite positive signs. They recommend selling Oct $34 puts for
$1.95 to capture yield, position short skew and commit to buy shares on
weakness. With a reference price of $41.88, the strategy has an effective entry
price of $32.05 with risk that shares are below the strike price at expiry.

Reuters Messaging: doris.frankel.reuters.com@reuters.net
0914 ET 29May2009-Volatility indexes look bullish for market
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The VIX, the implied volatility measure for the S&P 500 .SPX, fell 2.13
percent to 31.67 on Thursday.

Volatility indexes have remained steadfastly bullish, as both the CBOE
Volatility Index .VIX and the CBOE's VXO .VXO, which tracks projected
volatility for the S&P 100 index .OEX options, continue to trend lower, said
Larry McMillan, president of McMillan Analysis Corp in a note. Unless the spot
VIX climbs above 34, it is still sending out bullish signals, he added.
Historically, a VIX near a 30 reading is not low and as long as it continues to
trend lower, McMillan views that as a positive for the broad market. The VIX
also has a close relationship with actual volatility. "With 20-day realized
volatility at 29.584 and 10-day volatility at 29.037, we maintain our view that
the VIX and other measures of implied volatility cannot fall further without a
drop in realized volatility," said Michael McCarty, chief equity and options
strategist at Meridian Equity Partners.

Reuters Messaging: doris.frankel.reuters.com@reuters.net