Schaeffer's Trading Floor Blog

Options Check-Up: Bank of America Corp, SunPower Corporation, and VIVUS, Inc.

Analyzing recent option activity for BAC, SPWR, and VVUS

by 5/5/2014 6:51 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are financial kingpin Bank of America Corp (NYSE:BAC), alternative energy concern SunPower Corporation (NASDAQ:SPWR), and biopharmaceutical firm VIVUS, Inc. (NASDAQ:VVUS). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on BAC, SPWR, and VVUS.

  • BAC has seen a change of pace in its options pits, following its first-quarter earnings report about two weeks ago. Heading into the quarterly event on April 16, speculators were placing bullish bets over bearish at an annual-high rate. While the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.33 still shows long calls have outnumbered long puts during the past 10 trading days, the ratio ranks in the 57th annual percentile, demonstrating the recent rate of put buying, relative to call buying, is actually slightly accelerated. It's no wonder speculators have upped the bearish ante on Bank of America Corp, which on Monday said it would suspend its buyback program and planned dividend increase due to a miscalculation. The stock is now down 15.4% from its three-year high of $18.03, tagged on March 21, to trade at $15.25. Furthermore, the stock's Schaeffer's Volatility Index (SVI) of 20% ranks 14 percentage points from a 12-month low, indicating front-month BAC options are attractively priced right now, from a volatility perspective.

  • While SPWR has advanced more than 28% over the past two weeks to trade at $33.98 -- amid a string of headlines and bullish brokerage notes -- option traders have bought to open puts, relative to calls, at a near-annual-high pace. To be specific, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.65 ranks just 9 percentage points from a 12-month bearish peak. Currently, SunPower Corporation's front-month options are cheaper than usual, relatively speaking, as the stock's SVI of 46% ranks lower than 96% of comparable readings from the past year.

  • The rate of VVUS put buying, relative to call buying, has been at an annual-high level during the past 10 weeks leading up to the company's first-quarter earnings report Monday afternoon. This is evidenced by the fact that the stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.67 ranks the highest of all other readings taken during the past 12 months. Speculators purchasing front-month options on VIVUS, Inc. ahead of the quarterly event have done so at a slight discount, relatively speaking, as the equity's SVI of 66% ranks in the 43rd percentile of its 12-month range. Meanwhile, on the charts, VVUS shares have lost about 42% so far this year to trade at $5.26.


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