Schaeffer's Trading Floor Blog

Options Check-Up: Facebook Inc (FB), Dendreon Corporation, and American Express Company

Analyzing recent option activity for FB, DNDN, and AXP

by 4/13/2014 6:33 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are social networking heavyweight Facebook Inc (NASDAQ:FB), biotech firm Dendreon Corporation (NASDAQ:DNDN), and credit card issuer American Express Company (NYSE:AXP). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on FB, DNDN, and AXP.

  • Bearish bettors, relative to their bullish counterparts, have swarmed FB's options pits at an annual-high rate during the past two weeks, per the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.63, which ranks above all other similar readings from the past 12 months. This isn't surprising considering Facebook Inc has fallen roughly 15% over the past month to trade at $58.53. Meanwhile, the stock's Schaeffer's Volatility Index (SVI) of 38% has dropped noticeably from last Monday's reading of 52%, indicating that short-term options have grown cheaper, in volatility terms.

  • While DNDN has shed close to 10% so far this year to trade at $2.70, its options traders have been particularly bullish of late, buying to open 13 calls for every put during the past two weeks -- perhaps in part because of the limited profit potential of long puts. The resulting 10-day ISE/CBOE/PHLX call/put volume ratio of 13.00 ranks in the 75th annual percentile, demonstrating a faster-than-usual rate of call buying, relative to put buying, recently. Considering Dendreon Corporation's SVI of 73% ranks in the bottom 24% of its 12-month range, now is an opportune time to purchase short-term DNDN contracts, as they are more affordable than usual right now, from a volatility perspective.

  • AXP -- which is down more than 9% over the past month to trade at $84.54 -- has seen an increase in bearish betting, relative to bullish, in its options pits in the sessions leading up to its first-quarter earnings report. This is evidenced by the fact that AXP's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.81 ranks in the 69th annual percentile. Front-month option traders are willing to pay a pretty penny for their bets on American Express Company, ahead of Wednesday evening's quarterly event. The equity's SVI of 39% ranks the highest of all comparable readings taken during the past year.

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