Schaeffer's Trading Floor Blog

Options Check-Up: BlackBerry Ltd, Baidu Inc (ADR), and Alcatel Lucent SA (ADR)

Analyzing recent option activity for BBRY, BIDU, and ALU

by 6/4/2014 7:24 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are smartphone maker BlackBerry Ltd (NASDAQ:BBRY), Chinese Internet search engine Baidu Inc (ADR) (NASDAQ:BIDU), and telecom services provider Alcatel Lucent SA (ADR) (NYSE:ALU). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on BBRY, BIDU, and ALU.

  • Although BBRY has tumbled nearly 28% over the last three months to trade at $7.48, speculators have bought to open roughly six calls for every put during the past two weeks. The resulting 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 5.99 ranks in the top 5% of its 12-month range, demonstrating bullish bets have been in heavier-than-usual demand (compared to their bearish counterparts) recently. With almost 20% of BlackBerry Ltd's float sold short, some of this long call activity could be attributed to short sellers, picking up "insurance" against a potential rebound. Right now, short-term BBRY options can be purchased at a cheaper-than-usual price, from a volatility perspective, as the equity's Schaeffer's Volatility Index (SVI) of 57% ranks lower than 65% of comparable readings from the past year.

  • Nearly two BIDU calls have been bought to open for every put during the past 10 weeks. However, the recent rate of call buying, relative to put buying, is slower than usual, as evidenced by the fact that the resulting 50-day ISE/CBOE/PHLX call/put volume ratio of 1.79 ranks in the 24th annual percentile. Now is an opportune time to place short-term bets on Baidu Inc (ADR). The stock's SVI of 31% ranks just 5 percentage points from a 12-month low, meaning front-month contracts are attractively priced, relatively speaking. Furthermore, BIDU shares have advanced 16.4% from their April 7 year-to-date low of $140.66 to linger near $163.67.

  • While ALU's top-heavy 10-day ISE/CBOE/PHLX call/put volume ratio of 8.66 appears bullishly skewed on an absolute basis, the reading ranks in the bottom 32% of its 12-month range, meaning long calls have actually been scooped up over puts at a slower-than-usual pace of late. (By nature, calls will be in greater demand on a low-priced name like ALU, given the limited profit potential of long puts.) Like BIDU, Alcatel Lucent SA's (ADR) SVI of 38% ranks in the 5th annual percentile, indicating the equity's short-term options are relatively cheap right now. Meanwhile, on the charts, ALU shares are sitting 13.2% below their year-to-date flat line to trade at $3.82.
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