Schaeffer's Trading Floor Blog
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are rare earths concernMolycorp Inc (NYSE:MCP), diversified conglomerate General Electric Company (NYSE:GE), and agricultural giant Potash Corp./Saskatchewan (USA) (NYSE:POT). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on MCP, GE, and POT.

  • Speculators have bought to open puts over calls at an annual-high clip in MCP's options pits during the past two weeks, as evidenced by the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.38, which ranks the highest of all comparable readings taken during the past 12 months. It's not surprising option traders are bearish on Molycorp Inc right now, considering the stock has plunged 39% over the past month to trade at $2.91. Furthermore, prices on short-term MCP options are relatively average, from a volatility perspective, as the equity's Schaeffer's Volatility Index (SVI) of 79% ranks in the 48th annual percentile.

  • GE's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.98 ranks in the 74th percentile of its 12-month range, indicating long calls have been flying off the shelves at a faster-than-usual pace recently (compared to puts). Considering General Electric Company's SVI of 14% ranks just 6 percentage points from an annual low, now is an opportune time to purchase front-month options at a discount. Meanwhile, on the charts, GE shares have advanced a modest 4.7% over the past three months to perch at $26.65. On the fundamental front, reports surfaced yesterday that GE has pledged to create 1,000 new jobs in France as a means of upping the ante on its bid for Alstom SA's power-equipment division.

  • Although POT is up close to 10% year-to-date to linger near $36.19, option traders have placed bearish bets (relative to bullish) at an accelerated clip in recent sessions. In fact, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.66 ranks in the top 15% of its annual range. Luckily for short-term option buyers, front-month contracts are relatively inexpensive right now, with Potash Corp./Saskatchewan's (USA) SVI of 16% ranking just 1 percentage point from a 12-month low.
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