Schaeffer's Trading Floor Blog

Options Check-Up: ARM Holdings plc (ADR), First Solar, Inc., and Akamai Technologies, Inc.

Analyzing recent option activity on ARMH, FSLR, and AKAM

by 8/14/2014 7:30 AM
Stocks quoted in this article:

Among stocks attracting attention from options traders lately are chip maker ARM Holdings plc (ADR) (NASDAQ:ARMH), alternative energy issue First Solar, Inc. (NASDAQ:FSLR), and cloud concern Akamai Technologies, Inc. (NASDAQ:AKAM). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on ARMH, FSLR, and AKAM.

  • ARMH finished Tuesday's session 0.8% lower at $44.97 -- a day after Societe Generale warned Intel Corporation's (NASDAQ:INTC) new chip could create some headwinds for its sector peer. Year-to-date, shares of ARM Holdings plc (ADR) have shed 18%, yet sentiment among option traders is tilted toward the bullish side. Over the past 10 sessions, the stock has racked up a call/put volume ratio of 8.30 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks in the 88th percentile of its annual range. Simply stated, calls have been bought to open over puts with more rapidity just 12% of the time within the past year. At present, short-term ARMH options are pricing in low volatility expectations, per the security's Schaeffer's Volatility Index (SVI) of 32%, which ranks lower than 73% of similar readings taken in the past year.

  • A handful of bounces off its 140-day moving average have helped FSLR add more than 27% this year; however, the equity is now staring up at familiar resistance in the $70 region -- home to a heavy accumulation of call open interest in the front-month series of options. On Tuesday, the shares closed just shy of this overhead mark at $69.50. While analysts have recently taken note of this uptrend, put buying at the ISE, CBOE, and PHLX has reached peak levels. Specifically, FSLR's 10-day put/call volume ratio of 0.86 rests higher than all other readings taken in the last 12 months. Given the equity's year-to-date gains, a portion of this activity could be a result of shareholders protecting against a pullback. Regardless, First Solar, Inc.'s short-term options can currently be had on the cheap -- the security's SVI of 39% ranks in just the 10th percentile of its annual range.

  • Option traders have been eyeing more upside for AKAM, which has tacked on nearly 29% from its Feb. 3 year-to-date low of $45.59 to trade at $58.70. During the course of the past 10 weeks, the equity has racked up a call/put volume ratio of 3.38 on the ISE, CBOE, and PHLX. What's more, this ratio ranks just 8 percentage points from a 52-week peak, pointing to a distinct bullish bias in AKAM's options pits in recent months. Now appears to be an opportune time to place short-term bets on Akamai Technologies, Inc. at a relative bargain, as evidenced by the equity's SVI of 27% -- in the 16th annual percentile.

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