Investor takes a strangle hold on shares of billboard advertiser, Lamar

Today’s tickers: LAMR, WFC, HBC, MON & FDO LAMR – Lamar Advertising – The fact that a recession is eating away at advertising revenue doesn’t seem to worry an investor today who sold a strangle on Lamar, which operates outdoor billboards in the U.S. and in Canada and Puerto Rico. The company’s share price is already well off its $44.48 peak and indeed has rebounded from an $8.69 low recently, which is possibly what this option investor has his or her eye on. The trade involved the simultaneous sale of July calls with a 17.5 strike and puts with a 12.5 strike for a gross premium of 4.50 per contract. Both contracts saw volume of 9,775 lots as the investor appears to be selling volatility, which currently registers a reading of 85%. Such volatility boosts the value of option contracts and in this case the investor considers the price high enough to sell in the expectation that the cost of protection exaggerates the likely outcome. Today its shares are 5.9% lower at $15.60. The investor probably figured that an earnings cave-in as the economy slows and in this case will keep the entire premium should Lamar’s shares remain within the two strike prices ahead of expiration over the next six months. The trade makes incrementally less money at expiration if its shares stray outside the two strike prices and would register actual losses should the shares bust below $8.00 or above $22.00. WFC – Wells Fargo & Co. – Banking stocks took a punch in the gut when Oppenheimer’s rather accurate banking analyst forecast further loan loss provisions due to deteriorating quality of mortgage securities in the fourth quarter of 2008. Included in the dispatch was Wells Fargo, but as if that wasn’t enough, ratings agency Moody’s cut its senior debt rating based on indigestion of Fargo’s acquisition of Wachovia last year, which might increase losses but would certainly lower earnings ahead. WFC lost 2.7% to $26.81 by noon while the flurry of negative news drove up option plays on the stock. Our market scanners indicate that this security is the most actively traded so far today and has total volume of 211,000 contracts. Investors were quick to sell January expiration calls at the 27.5 strike in anticipation of a further downdraft for its shares. The sale of puts at the strike possibly indicates closing sales of bear positions, while investors also sold puts…