Schaeffer's Trading Floor Blog

Options Check-Up: Alcatel Lucent SA (ADR), The Bon-Ton Stores, Inc., and Dendreon Corporation

Analyzing recent option activity for ALU, BONT, and DNDN

by 3/11/2014 6:16 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are telecom concern Alcatel Lucent SA (ADR) (NYSE:ALU), retailer The Bon-Ton Stores, Inc. (NASDAQ:BONT), and biotech issue Dendreon Corporation (NASDAQ:DNDN). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on ALU, BONT, and DNDN.

  • ALU has rallied roughly 176% on a year-over-year basis and closed at $4.08 today, yet the Paris-based tech name has yet to entice bulls into its options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 50-day put/call volume ratio of 0.16. Though low on an absolute basis -- perhaps due to Alcatel Lucent's modest per-share price, which limits the profit potential on bearish bets -- the ratio ranks higher than 69% of similar readings from the last year. Short-term ALU options can be had at a relative bargain, as well, as the equity's Schaeffer's Volatility Index (SVI) of 47% is just 2 percentage points from a 12-month nadir.

  • Unlike ALU, BONT is a technical laggard, down nearly 40% in 2014. Today, in fact, the shares shed almost 10% to close at $9.81, following the department store operator's disappointing turn in the earnings confessional, and news of CEO Brendan Hoffman's impending departure. Still, call buyers have taken a liking to The Bon-Ton Stores, Inc., as the security boasts a 50-day ISE/CBOE/PHLX call/put volume ratio of 7.45, which registers in the 84th percentile of its annual range -- though with nearly one-third of the stock's float sold short, some of the call buyers may be short sellers looking to hedge their downside bets. Whatever their motive, traders targeting short-term BONT options are paying a steep price, relatively speaking. The stock's SVI of 100% is higher than all similar readings from the last 52 weeks.

  • Another equity that's struggled on the charts lately is DNDN, which has fallen 15.9% from last week's near-term high of $3.46, and now trades at $2.91. The options crowd has preferred long calls over puts on Dendreon Corporation, as the stock's 50-day call/put volume ratio checks in at 4.82 at the ISE, CBOE, and PHLX -- higher than all but 12% of comparable readings, looking back one year. (Though, again, some of this activity may be the result of short sellers protecting their bearish stock positions, as short interest accounts for 30.5% of DNDN's total float.) From a volatility perspective, short-term DNDN options are fairly priced right now, too. The stock's SVI of 64% sits just 9 percentage points from an annual low.

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