Schaeffer's Trading Floor Blog

Options Check-Up: Ford Motor Company, Micron Technology, Inc., and Johnson & Johnson

Analyzing recent option activity for F, MU, and JNJ

by 4/11/2014 7:52 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are automaker Ford Motor Company (NYSE:F), semiconductor concern Micron Technology, Inc. (NASDAQ:MU), and health care products specialist Johnson & Johnson (NYSE:JNJ). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on F, MU, and JNJ.

  • F is down 6.9% from its Jan. 17 year-to-date high of $16.78 to trade at $15.63, yet option players have preferred to bet bullishly on the stock in recent months. In fact, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.11 ranks 7 percentage points from a 12-month peak, pointing to a near-annual-high level of call buying, relative to put buying, during the past 10 weeks. An extension of F's downtrend may cause these bullish bettors to hit the exits, which could create additional technical pressure for the shares. At least the short-term speculators are purchasing contracts at a relatively cheap price, though, as Ford Motor Company's Schaeffer's Volatility Index (SVI) of 18% ranks lower than 89% of comparable readings from the past year.

  • Calls have been bought to open over puts at a slightly slower-than-usual pace in MU's options pits of late, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 3.42 ranks in the 44th annual percentile. Nevertheless, now is an opportune time to purchase short-term options on Micron Technology, Inc. The equity's SVI of 38% ranks in the bottom 10% of its 12-month range, meaning prices on these contracts are nearing annual-low levels, from a volatility perspective. Meanwhile, on the charts, MU shares boast a 12-month gain of nearly 115% to trade at $21.68. In spite of this, short interest accounts for nearly 12% of the stock's available float. Should the equity continue its longer-term ascent, an unwinding of these bearish bets could help fuel MU's fire.

  • JNJ -- which is up a slim 5.4% year-to-date to trade at $96.54 -- has seen heavier-than-usual long put buying (relative to long call demand) in the sessions leading up to its first-quarter earnings report, slated for release the morning of Tuesday, April 15. In fact, during the last 10 trading days, the equity has racked up an ISE/CBOE/PHLX put/call volume ratio of 1.06, which ranks higher than 78% of similar readings taken during the past year. Ahead of Johnson & Johnson's quarterly announcement, the stock sports an SVI of 16%, which ranks in the 57th annual percentile, indicating short-term options are slightly more expensive than usual, relatively speaking.

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