Railroad Bulls Expect CSX Recovery on Track

Today’s tickers: CSX, VALE, ERTS, JNPR, BRCD & ORCL CSX  - The supplier of rail-based transportation services attracted option optimists to the November contract today amid a 2.5% rally in shares to $42.68. Bullishness was expressed through put selling as investors appear to expect CSX to continue to thrive through expiration in November. Approximately 7,300 puts were sold short at the November 40 strike for an average premium of 2.03 apiece. Traders selling these contracts retain the full credit as long as shares of CSX remain higher than $40.00 through expiration next month. Investors shorting the puts pocket the 2.03 credit in exchange for bearing the risk that shares decline beneath $40.00. If the puts land in-the-money by expiration, traders short the puts will have shares of the underlying stock put to them at price of $40.00 apiece. Therefore, losses begin to accumulate if shares fall 11% from the current price and breach the breakeven point to the downside at $37.97. – CSX Corp. – VALE  - Investors in the Brazilian metals and mining company enjoyed a more than 3% rally in shares to $23.63. The current share price represents a new 52-week high for the stock, which is one nickel greater than the previous 52-week high of $23.58, attained back on September 23, 2009. We observed bullish sentiment in the November contract where one investor established a risk reversal by shorting puts to finance the purchase of calls. The optimistic play involved the sale of 8,000 puts at the November 21 strike for a premium of 60 cents apiece, spread against the purchase of 8,000 calls at the higher November 25 strike for an average premium of 71 cents per contract. The net cost of assuming a long call position amounts to 11 pennies apiece. Shares of Vale must rise another 6% by expiration for the investor to begin to accumulate profits above the breakeven point at $25.11. – Vale SA – ERTS  - Shares at the game-maker are higher by 3% at $18.89 today making the options action a little curious. An investor appears to be writing nearby in-the-money puts in exchange for buying those at out-of-the-money strikes at later expiries. An investor sold 13,700 November puts at the 19 strike for a 1.50 premium, meaning he’d have shares put to him if they remain below the strike in seven weeks time. In the meantime he insures worried ERTS traders and takes in…