Schaeffer's Trading Floor Blog

Options Check-Up: BlackBerry Ltd, Baidu Inc (ADR), and Zynga Inc

Analyzing recent option activity for BBRY, BIDU, and ZNGA

by 7/16/2014 7:37 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are smartphone maker BlackBerry Ltd (NASDAQ:BBRY), Chinese Internet titan Baidu Inc (ADR) (NASDAQ:BIDU), and social game guru Zynga Inc (NASDAQ:ZNGA). 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 ZNGA.

  • BBRY has rallied more than 51% in 2014, and is within a point of a new annual high. In fact, the stock has outperformed the broader S&P 500 Index (SPX) by 48 percentage points during the past three months, closing at $11.30 on Tuesday. In the options pits, speculators have picked up BlackBerry Ltd calls over puts at an accelerated clip in recent weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 4.13 sits just 3 percentage points from an annual peak. However, some of the recent call buying may be attributable to short sellers looking for a hedge, as short interest accounts for almost 20% of BBRY's total available float. Whatever the motive, now is an opportune time to buy BBRY's short-term options, as the stock's Schaeffer's Volatility Index (SVI) of 51% sits in the bottom quartile of its annual range.

  • BIDU, meanwhile, advanced 0.7% to settle at $189.87. The stock has rallied more than 80% over the past year, and touched a record high of $193.89 two weeks ago. Ahead of the company's second-quarter earnings release next Thursday morning, option traders are buying to open Baidu Inc (ADR) puts over calls at a faster-than-usual pace. The stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.60 stands higher than 89% of all other readings from the past year. While demand for BIDU's short-term contracts is on the rise ahead of earnings, the stock's options remain relatively inexpensive. In fact, the equity's SVI of 39% registers in the 30th percentile of its annual range.

  • Finally, ZNGA finished 1.7% lower at $3.13, after valuation comments from the Fed weighed on the social networking sector. From a longer-term perspective, the stock has outperformed the SPX during the past month, and has added more than 13% since hitting a year-to-date low of $2.73 in early June. In the options pits, traders are buying to open ZNGA calls over puts at an accelerated clip ahead of earnings, tentatively scheduled for sometime next week. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 8.51 stands higher than 73% of all other readings from the past year, and its Schaeffer's put/call open interest ratio (SOIR) of 0.35 ranks in the 29th annual percentile, suggesting short-term traders are more call-skewed than usual right now. Those near-term players are paying up to bet on Zynga Inc, too; the security's SVI of 70% ranks higher than 60% of the past year's worth of readings.

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