Today's column includes a bonus battle for Goldman Sachs Group, Inc. (GS), job cuts at Nokia Corporation (NOK), a boosted notes offering for DryShips Inc. (DRYS), and a dividend hike for NIKE, Inc. (NKE). Each day, Options Edge focuses on the hot stocks in the news and gives you a unique insight into each stock's sentiment backdrop. Our time-tested contrarian approach centers on options, and gives you the trading tools to approach the day with a much-needed edge over the investing herd.
Goldman Sachs Group, Inc.
A report today in The Wall Street Journal suggests that shareholders are none too pleased with the bonus structure at Goldman Sachs Group, Inc. (GS: sentiment, chart, options). Apparently, some of the bank's largest investors think that Goldman is passing too much of the wealth along to its employees, without rewarding shareholders for sticking it out through the turmoil of the past year's financial crisis.
Specifically, the newspaper reports that Goldman employees are on track to earn roughly $717,000 apiece in 2009. Eliminating temporary employees and consultants, that number would rise to $775,000 per worker -- higher than the average of $661,490 that was earned in 2007, prior to the market's crash.
GS is off 0.8% in pre-market trading, but the shares could find a cushion in the form of their rising 20-week moving average. This trendline, along with its 10-week counterpart, has supported the stock since early February.
Options-related support should also help to keep the shares afloat in today's trading. With the November series set to expire at the end of the session, GS is perched above peak put open interest of 15,465 contracts at the 170 strike.
Nokia Corporation
Nokia Corporation (NOK: sentiment, chart, options) said today that it will trim roughly 2% of the payroll from its research and development (R&D) operations in Finland and Denmark "in order to be in line with the company's focused portfolio of future products." Roughly 330 workers will be affected; up to 230 at NOK's Oulu, Finland facility, and approximately 100 employees at the firm's Copenhagen outpost. Nokia said it will attempt to support the affected employees by offering them jobs elsewhere within the company whenever possible.
U.S.-traded shares of NOK are off 2.8% ahead of the open, adding to their year-to-date deficit of 12.8%. The equity is hovering near the middle of its trading range between $12 and $16, which has confined all of the stock's movements since early April.
Despite NOK's unimpressive price action, speculators are gravitating toward bullish bets. During the past 10 days, traders on the International Securities Exchange (ISE) have bought to open 3.87 calls for every put on the Finnish phone firm. This ratio ranks in the 90th annual percentile, marking a near-peak of optimism.
DryShips Inc.
DryShips Inc. (DRYS: sentiment, chart, options) reported last night that it boosted the size of its convertible senior notes offering from $300 million to $400 million. The convertible notes are being issued at a price equal to 100% of their face value, with an interest rate of 5%. The initial conversion price for the notes will be $7.19 per share, and the sale is expected to close Nov. 25. Additionally, DRYS said it entered a share lending agreement with Deutsche Bank (DB), under which it will loan DB 26.1 million shares of its common stock.
DRYS has dropped 6.2% in pre-market action. The stock has bounced between $5 and $8 since mid-May, yet it has still managed to outperform the broader S&P 500 Index (SPX) by 16 points during the past 60 days.
Option players are showing a clear bias toward calls over puts, with the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.29 hovering just one percentage point from an annual bullish peak. However, with short interest rising by more than 19% during the past month, some of these optimistically oriented options might have been picked up as hedges.
NIKE, Inc.
NIKE, Inc. (NKE: sentiment, chart, options) announced an 8% hike to its quarterly dividend last night, bringing the payout to 27 cents per share. "We are pleased to increase our dividend for the eighth year in a row," said Mark Parker, president and CEO. "Over the last five years we have more than doubled our annual dividend and paid out over $1.8 billion to shareholders -- reflecting our commitment to delivering value to shareholders and our on-going confidence in the business." The dividend is payable on Jan. 4, 2010 to shareholders of record as of Dec. 7.
NKE has ticked fractionally lower ahead of the open, dragged south by an early downside bias in the market. However, the shares could catch a boost from rising support at their 10-week moving average.
An unraveling of pessimism among option players could also help NKE's case. The stock's SOIR stands at 1.08, and its 10-day ISE put/call volume ratio arrives at 1.21 -- indicating that speculative investors are favoring puts over calls by a noteworthy margin.
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