Schaeffer's Trading Floor Blog

Options Check-Up: Salesforce.com, inc., Dollar Tree, Inc., and GT Advanced Technologies Inc

Analyzing recent option activity on CRM, DLTR, and GTAT

by 8/20/2014 7:40 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are cloud specialist Salesforce.com, inc. (NYSE:CRM), discount retailer Dollar Tree, Inc. (NASDAQ:DLTR), and LED specialist GT Advanced Technologies Inc (NASDAQ:GTAT). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on CRM, DLTR, and GTAT.

  • CRM is slated to report its fiscal second-quarter earnings results after Thursday's close, and in the two weeks leading up to the scheduled event, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 118 puts for each 100 calls. Meanwhile, the resultant put/call volume ratio of 1.18 ranks in the 92nd percentile of its annual range, meaning puts have been bought to open over calls with more rapidity just 8% of the time within the past year. Those looking to place front-month bets on CRM are currently able to do so at a relative bargain, per the equity's Schaeffer's Volatility Index (SVI) of 35%, which ranks lower than 61% of similar readings taken over the last 12 months. On Tuesday, CRM closed at $54.96 -- just fractions of a point below its year-to-date breakeven mark.

  • Also taking its turn at the earnings plate on Thursday is DLTR, which unveils its second-quarter results ahead of the opening bell. According to the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 8.01 -- which ranks in the 96th annual percentile -- option traders have rarely been as bullish toward DLTR as they are now. Front-month options are pricing in average volatility expectations for the equity, as evidenced by Dollar Tree, Inc.'s SVI of 26%, which ranks in the middling 46th percentile of its annual range. On the charts, outside of a late-July M&A-related surge, DLTR has spent the majority of the past few months churning between $54 and $56.50, and finished Tuesday's session at $54.71.

  • GTAT has been a technical powerhouse in 2014, with the shares more than doubling in value on a year-to-date basis. What's more, the stock is maintaining its title of being a strong outperformer in August -- up nearly 33% month-to-date to trade at $18.40. At the ISE, CBOE, and PHLX, though, the stock's 10-day put/call volume ratio of 0.94 ranks just 4 percentage points from a bearish peak. In light of the equity's upward momentum, a portion of this put buying could be protective in nature. Regardless of the reason, now appears to be an opportune time to place bets on GT Advanced Technologies Inc's near-term trajectory. According to the equity's Schaeffer's Volatility Scorecard (SVS) reading of 87, the stock tends to make outsized moves relative to what the options market has priced in.

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