Schaeffer's Trading Floor Blog

Options Check-Up: Ford Motor Company, Herbalife Ltd., and Sirius XM Holdings Inc.

Analyzing recent option activity on F, HLF, and SIRI

by 7/7/2014 5:13 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are automaker Ford Motor Company (NYSE:F), nutritional supplements specialist Herbalife Ltd. (NYSE:HLF), and satellite radio concern Sirius XM Holdings Inc. (NASDAQ:SIRI). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on F, HLF, and SIRI.

  • Since taking a sharp bounce off its 320-day moving average in mid-May, F has rallied more than 10% to trade at $17.32. Against this backdrop, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than seven calls for each put over the past 10 sessions. What's more, the resultant call/put volume ratio of 7.18 ranks higher than 91% of similar readings taken in the past year, meaning long calls have been initiated (relative to puts) at a near-annual-high clip. Now is an opportune time to purchase front-month F options at a relative bargain, too, per the stock's Schaeffer's Volatility Index (SVI) of 15%, which ranks in the 11th percentile of its annual range. Meanwhile, ahead of its Thursday, July 24, quarterly earnings release, Ford Motor Company announced today that sales in China rose 35% in the first half of the year.

  • HLF will take its turn in the earnings confessional after the market closes on Monday, July 28. Option traders have been lining up on the bearish side of the fence, as evidenced by the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 7.96, which ranks higher than all other comparable readings taken in the past 52 weeks. Those purchasing HLF's short-term options are getting quite a steal, considering the stock's SVI of 29% is ranked in the lowest annual percentile. Simply stated, premium on Herbalife Ltd.'s options is cheaper now than it has been at any other point over the past year. Today, the stock closed the session fractionally higher at $66.18, but remains roughly 16% lower year-to-date.

  • Following Friday's reports that SIRI fired a controversial radio host, shares of the stock surrendered nearly 1% to finish at $3.43. In the stock's options pits, bullish betting has been a popular strategy in recent months. Specifically, the equity's 50-day call/put volume ratio of 9.16 at the ISE, CBOE, and PHLX ranks 8 percentage points from an annual peak. With more than 11% of Sirius XM Holdings Inc.'s float sold short, though, a portion of this activity could be a result of shorts hedging. Regardless of the reason, SIRI's SVI of 19% ranks lower than all other readings taken during the past 12 months, meaning premium on the stock's near-term options is currently inexpensive, from a volatility standpoint.

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