Schaeffer's Trading Floor Blog
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are IT services provider Cisco Systems, Inc. (NASDAQ:CSCO), global mining company Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), and streaming music provider Pandora Media Inc (NYSE:P). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on CSCO, FCX, and P.

  • CSCO has moved 8.9% higher over the past month to trade at $23.50; however, it seems option traders have little hope that this uptrend will continue. To be specific, CSCO's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.78 ranks in the 83rd annual percentile, demonstrating puts have been bought to open, relative to calls, at an accelerated pace during the past two weeks. Meanwhile, Schaeffer's Volatility Index (SVI) for Cisco Systems, Inc. comes in at 27%, which ranks in the bottom one-third of its 12-month range. This means front-month options are attractively priced, from a volatility point of view.

  • FCX -- which reports first-quarter earnings ahead of tomorrow's opening bell -- has also seen an uptick in bearish betting lately, though the stock seems more deserving of the skepticism, considering it is down 11.2% year-to-date to trade at $33.50. At the ISE, CBOE, and PHLX, Freeport-McMoRan Copper & Gold Inc.'s 10-day put/call volume ratio of 0.63 ranks higher than 89% of comparable readings taken during the past year, showing a faster-than-usual rate of put buying, relative to call buying, of late. Now is an opportune time to place short-term bets on FCX, relatively speaking, as the equity's SVI of 24% ranks in the bottom 19% of its 12-month range.

  • On the other hand, P -- which has fallen more than 10% over the past month to trade at $28.17 -- has seen heavier-than-usual bullish betting, relative to bearish, in its options pits of late, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.82 ranks in the 71st annual percentile. Meanwhile, with Pandora Media Inc scheduled to release first-quarter earnings after tomorrow's close, the equity's SVI of 71% ranks in the 65th percentile of its 12-month range, meaning front-month contracts are relatively expensive right now.

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Stocks to Watch Thursday: SunPower Corporation, Chesapeake Energy Corporation, and Illumina, Inc.

Analyzing SPWR, CHK, and ILMN ahead of tomorrow's trading

by 4/23/2014 4:53 PM
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Momentum names that made notable moves on Wednesday and could continue to do so into Thursday's session include solar power company SunPower Corporation (NASDAQ:SPWR), oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK), and scientific tools concern Illumina, Inc. (NASDAQ:ILMN). Here is a quick look at these stocks ahead of tomorrow's opening bell.

SunPower Corporation (NASDAQ:SPWR)

SunPower investors had much to celebrate at the company's annual shareholder meeting this afternoon. After spiking an additional 7.2% today to close at $31.48, SPWR shares are now up nearly 19%% week-to-date. Giving the stock a boost was yesterday's bullish initiation at Brean Capital, along with this morning's upgrade to "buy" from "neutral" at BofA-Merrill Lynch. Plus today, SunPower announced it is teaming up with Google Inc (NASDAQ:GOOGL) to create a $250 million program to finance residential rooftop solar systems. In response to the news, speculators overcrowded SPWR's options pits, trading more than three times the expected daily amount of contracts. To be more specific, call volume arrived at roughly 16,000 contracts, compared to put volume of about 12,000 contracts. However, considering 37.1% of the equity's float is sold short, some of this heavy call activity may be attributed to short sellers hedging against more upside -- or perhaps an earnings-induced pop. SunPower is slated to enter the earnings confessional after tomorrow's closing bell.

Chesapeake Energy Corporation (NYSE:CHK)

After tackling a fresh two-year high of $29.25 this morning, Chesapeake settled with a 2% gain to close at $29.02, and the shares are now positioned 17.4% higher on a one-month basis. Meanwhile, today's total options volume on CHK more than tripled the average daily amount, with calls outnumbering puts by a margin of 5-to-1. This activity reflects a broader trend in the equity's options pits. Chesapeake's top-heavy 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 18.89 ranks higher than all other comparable readings from the past year, indicating calls have been bought to open over puts at an annual-high pace recently. Not to mention, the stock's Schaeffer's put/call open interest ratio (SOIR) comes in at an annual-low reading of 0.36, demonstrating short-term speculators are more call-heavy now than they have been at any other time this year. Of note, however, short interest on CHK represents roughly seven sessions' worth of pent-up buying demand, at the shares' average pace of trading, meaning some of this heavy call activity could have come at the hands of short sellers hedging against extended gains.

Illumina, Inc. (NASDAQ:ILMN)

Illumina's strong first-quarter earnings results and subsequent price-target hikes sent the shares 3.9% higher to close at $153.69. Needless to say, options activity on ILMN skyrocketed today, with total options volume more than tripling what is typically traded on a daily basis. Calls and puts changed hands at a neck-and-neck pace. On the call side, it is possible short sellers were responsible for some of the heavier-than-usual activity. Currently, short interest accounts for 18% of ILMN's available float, which is equivalent to nearly nine sessions' worth of pent-up buying demand, at the stock's average daily volume.


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Earnings on Deck: Microsoft Corporation, Amazon.com, Inc., and Sirius XM Holdings Inc.

Previewing MSFT, AMZN, and SIRI ahead of their upcoming earnings reports

by 4/23/2014 2:21 PM
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The line for the earnings confessional is out the door, with a slew of notable names waiting to report. Among them are tech titan Microsoft Corporation (NASDAQ:MSFT), e-commerce giant Amazon.com, Inc. (NASDAQ:AMZN), and satellite radio issue Sirius XM Holdings Inc. (NASDAQ:SIRI). Here's a quick look at these names as earnings approach.

  • Microsoft Corporation (NASDAQ:MSFT) will unveil its fiscal third-quarter figures after the close tomorrow. The blue chip has bested the Street's per-share profit projections in five of the past seven quarters, and found itself in the black one week after its last two earnings reports. Nevertheless, MSFT puts are growing more popular, as the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 0.75 -- above 70% of all other readings from the past year. Likewise, short interest grew 14.5% during the past two reporting periods, reflecting skepticism on the Street. Should MSFT once again exceed earnings expectations, a mass exodus of option bears and/or a short-squeeze situation could add fuel to the stock's fire. At last check, MSFT has followed the broader equities market into the red, down 1.1% at $39.56.

  • Amazon.com, Inc. (NASDAQ:AMZN) will report first-quarter earnings after the close tomorrow. While the firm has fallen short of analysts' bottom-line estimates in five of the past eight quarters, the equity has averaged a one-week post-earnings gain of 2.5%. Short-term options traders and analysts are optimistic ahead of the event. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.82 sits just 1 percentage point from a 12-month nadir, implying that short-term speculators have rarely been more call-heavy during the past year. Meanwhile, 24 out of 29 analysts offer up "buy" or better endorsements, with not a single "sell" to be found. In afternoon trading, AMZN is 1.3% lower at $325.07, despite inking an exclusive deal with HBO.

  • Finally, Sirius XM Holdings Inc. (NASDAQ:SIRI) will release its first-quarter earnings before the open tomorrow. The company has matched or exceeded the Street's per-share profit predictions in five of the past eight quarters, averaging a gain of 1.2% one week after reporting. SIRI calls have been growing more popular on the long side, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 19.86 rests just 4 percentage points from a 52-week acme. What's more, short-term traders are paying a pretty penny to bet on SIRI's post-earnings trajectory, as the equity's SVI of 42% stands higher than 90% of all comparable readings from the past year. At last check, SIRI is 1.4% lower at $3.17, in the wake of a price-target cut at Wunderlich.

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Midday Market Stats: Dow Jones Industrial Average Slumps On Disappointing Economic Reports

Thermo Fisher Scientific Inc. and Amgen, Inc. plunge after reporting first-quarter earnings

by 4/23/2014 11:59 AM
Stocks quoted in this article:

The Dow Jones Industrial Average (INDEXDJX:.DJI) is sitting 17.8 points, or 0.11%, south of breakeven at midday, at 16,496.61, following a round of disappointing economic reports. First, the latest data on new home sales showed a sharp decline of 14.5% in March, compared to the modest gain projected by economists. Meanwhile, Markit's preliminary purchasing managers manufacturing index (PMI) dipped to a lower-than-expected 55.4. However, factory output for this month has grown at its fastest rate in three years.

Here are a few noteworthy stats at midday:

  1. The equity put/call volume ratio across all 12 options exchanges stands at 0.79. Roughly 3.07 million calls, compared to about 2.44 million puts, have crossed the tape so far.

  2. Among the names with call-heavy trading activity today is Thermo Fisher Scientific Inc. (NYSE:TMO). At last check, more than 95% of the stock's intraday options volume had changed hands on the call side. On the charts, meanwhile, TMO is down 1.8% to trade at $118.15, despite an upbeat turn in the earnings confessional this morning.

  3. The Nasdaq shows an advance/decline ratio of 0.84, with decliners easily outpacing advancing stocks.

  4. Among the underperformers on the Nasdaq today is Amgen, Inc. (NASDAQ:AMGN), which is down 6% to trade at $112.16, after reporting weak first-quarter earnings results last night.

  5. The CBOE Volatility Index (VIX) is up 1.8% at 13.43 this afternoon, but is still on pace to finish its fourth consecutive session below the 14 mark.

  6. The iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) is down .02%% to $40.89. Meanwhile, the ETN's put/call volume ratio stands at 1.89, with put volume almost doubling call volume.

View a real-time chart of the Dow Jones Industrial Average (INDEXDJX:.DJI).

Unusual Option Volume

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Analyst Downgrades: Sirius XM Holdings Inc., AT&T Inc., and VMware, Inc.

Analysts downwardly revised their ratings on SIRI, T, and VMW

by 4/23/2014 9:39 AM
Stocks quoted in this article:

Analysts are weighing in today on streaming music platform Sirius XM Holdings Inc. (NASDAQ:SIRI), telecom specialist AT&T Inc. (NYSE:T), and IT services provider VMware, Inc. (NYSE:VMW). Here's a quick roundup of today's bearish brokerage notes.

  • SIRI -- which is slated to report first-quarter earnings ahead of tomorrow's opening bell -- received a price-target cut to $3.50 from $3.80 at Wunderlich this morning. Since the start of 2014, Sirius XM Holdings Inc. has shed 7.5% to trade at $3.23, and investors have responded by upping the amount of short interest on the stock. During the past two reporting periods, these bearish bets increased by 30%, and now account for 8.3% of SIRI's available float.

  • T reported mixed first-quarter earnings results last night, spurring J.P. Morgan Securities to lower its price target to $34 from $35 this morning. (Meanwhile, Cowen and Company upped its price target by $1.) On the charts, AT&T Inc. has shed 3.9% out of the gate today to trade at $34.89, and is now sitting almost 1% below its year-to-date flat line. As such, the equity may see some downgrades in the near term, which could place additional pressure on the shares. At last check, T maintained nine "strong buy" endorsements, 15 "holds," and just one "strong sell" recommendation.

  • Last night, VMW forecast a narrower operating margin for the current quarter, and in response, a handful of brokerage firms downwardly adjusted their positions on the stock. This includes Barclays and Cowen and Company, which both slashed their price targets by $3 to $114 and $107, respectively. Meanwhile, on Main Street, short interest on VMware, Inc. accounts for roughly 23% of its available float. It would take nearly eight sessions to cover these bearish bets, at the shares' average pace of trading. Furthermore, VMW shares have plunged 10% already this morning to trade at $94.55.

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