Schaeffer's Trading Floor Blog

Options Check-Up: Ford Motor Company, Netflix, Inc., and JA Solar Holdings Co., Ltd. (ADR)

Analyzing recent option activity for F, NFLX, and JASO

by 3/3/2014 9:00 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are automotive expert Ford Motor Company (NYSE:F), streaming video concern Netflix, Inc. (NASDAQ:NFLX), and solar energy specialist JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on F, NFLX, and JASO.

  • F hasn't closed north of the $16 mark since mid-to-late January. In fact, the stock finished at $15.20 -- 9.4% below its year-to-date high of $16.78 (tagged on Jan. 17) -- as the automaker confessed to weather-related sales woes in February. Still, F option traders have been more bullish than usual recently, as my colleague Andrea Kramer pointed out last week. The 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio for Ford Motor Company comes in at 3.96, with long calls nearly quadrupling long puts. What's more, this ratio ranks in the 62nd annual percentile, indicating the recent rate of call buying, relative to put buying, is accelerated. Premium on F's short-term options is relatively inexpensive, from a volatility perspective, as the equity's Schaeffer's Volatility Index (SVI) of 20% ranks in the 15th percentile of its 12-month range.

  • Though NFLX has climbed 21% year-to-date to perch at $445.59, option players have been eying bearish bets during the past two weeks. The stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.12 ranks higher than 92% of comparable readings from the past year, meaning puts have been bought to open over calls at a near-annual-high pace of late. Even if Netflix, Inc. stays clear of a downturn, at least short-term bears can place bets at a bargain. The equity's SVI of 33% ranks 7 percentage points from a 12-month low, demonstrating short-term options are very cheap right now, relatively speaking.

  • JASO has tacked on more than 15% over the past month to perch at $9.95, yet option traders appear to be upping the bearish ante. On an absolute basis, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.42 appears bullishly skewed, as calls bought to open have more than doubled puts recently. However, this ratio ranks in the 82nd annual percentile, showing long puts have been preferred, relative to long calls, at a higher-than-usual rate. Right now is an opportune time to purchase front-month options on JA Solar Holdings Co., Ltd. (ADR). The stock's SVI of 62% ranks in the bottom 2% of its 12-month range, meaning these option prices are nearing annual-low levels, in volatility terms.

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