Schaeffer's Trading Floor Blog

Options Check-Up: BlackBerry Ltd, KB Home, and Micron Technology, Inc.

Analyzing recent option activity for BBRY, KBH, and MU

by 6/26/2014 5:24 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are mobile phone maker BlackBerry Ltd (NASDAQ:BBRY), homebuilder KB Home (NYSE:KBH), and semiconductor specialist Micron Technology, Inc. (NASDAQ:MU). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on BBRY, KBH, and MU.

  • BBRY finished 0.6% lower today at $9.92, but is still sitting about 33% higher on a year-to-date basis. Recently, traders have been upping the bullish ante on the equity, as its 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio registers at 4.22. This not only indicates long calls have more than quadrupled long puts during the past 10 weeks, but the ratio rests just 1 percentage point from a 12-month bullish acme -- though a portion of these bets may have been a result of short sellers hedging, as 20.3% of BlackBerry Ltd's float is sold short. Meanwhile, front-month options are relatively inexpensive right now, as BBRY's Schaeffer's Volatility Index (SVI) of 43% is lower than 85% of comparable readings, looking back one year.

  • KBH closed slightly below breakeven today at $17.88, and is off roughly 10% year-over-year. The homebuilder is slated to step into the earnings confessional bright and early tomorrow, where analysts are expecting a per-share profit of 19 cents for KBH's second quarter -- a 23-cent improvement over the company's year-ago results. Ahead of this event, traders have bought to open more than four KB Home calls for every put over the last two weeks, as evidenced by the stock's ISE/CBOE/PHLX call/put volume ratio of 4.09. This reading ranks in the 70th percentile of its annual range -- although, with nearly one-quarter of the equity's float sold short, some of the long calls may have been initiated by short sellers looking to hedge against a post-earnings rally. Whatever the case may be, short-term KBH options are priced affordably right now, as the equity's SVI of 33% is in the bottom quartile of its 12-month range.

  • Finally, MU slipped 1.1% today to close at $32.00, but has more than doubled on an annual basis. In the options pits, put buying has picked up, per the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.41, which stands higher than 82% of similar readings from the last year. Given Micron Technology, Inc.'s technical track record, however, some of these puts may be of the protective variety. Meanwhile, short-term MU contracts are very affordable right now, from a historical perspective -- the security's SVI of 31% is higher than just 7% of all other readings taken in the previous 52 weeks.

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