Stocks quoted in this article:
Among the stocks attracting attention from options traders lately are footwear peddler Finish Line Inc (NASDAQ:FINL), java giant Starbucks Corporation (NASDAQ:SBUX), and credit card issuer Visa Inc (NYSE:V). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on FINL, SBUX, and V.
- FINL closed 1.4% higher on Friday at $29.56 -- and hit a record high of $30.50 -- after reporting better-than-expected fiscal first-quarter earnings. The shares have been on a tear in recent months, tacking on 28.6% since hitting a year-to-date low of $22.99 in late February. Meanwhile, in the options pits, traders have been picking up puts at a faster-than-usual pace in recent weeks, per Finish Line Inc's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.83 -- which is higher than 82% of comparable metrics recorded in the past year. Of course, given the equity's positive technicals, a portion of these long puts may have been at the hands of shareholders trying to protect their portfolios against an unexpected tumble. Regardless, short-term FINL options are priced normally right now, as the security's Schaeffer's Volatility Index (SVI) of 40% ranks directly in the middle of its annual range.
- SBUX finished just below breakeven on Friday at $77.94, and remains in the red on a year-to-date basis. On the ISE, CBOE, and PHLX, however, speculators have been scooping up calls at twice the rate of puts during the past couple of weeks. Specifically, Starbucks Corporation's 10-day call/put volume ratio across those major exchanges registers at 2.51, or just 11 percentage points from a 12-month bullish peak. Should the stock's longer-term technical struggles persist, however, a capitulation among these optimistic bettors could pressure the shares lower. In any event, SBUX's SVI of 15% is approaching extreme territory right now, lower than 98% of comparable readings from the previous year -- making now a good time to buy premium on the coffee name.
- Finally, V moved little on Friday, closing at $209.28. Speaking more generally, the shares are down 6% in 2014. Not surprisingly, option traders have been upping the bearish ante toward Visa Inc, which boasts a 10-day ISE/CBOE/PHLX put/call volume ratio of 0.95. This ratio stands just 12 percentage points from a one-year pessimistic peak. Those hoping to pick up front-month options on V can do so at a relative bargain, too, as its SVI of 15% is in the bottom 4% of its 52-week range.