Schaeffer's Trading Floor Blog

Options Check-Up: Tesla Motors Inc (TSLA), Groupon Inc, and DryShips Inc.

Analyzing recent option activity on TSLA, GRPN, and DRYS

by 8/27/2014 7:42 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are electric car maker Tesla Motors Inc (NASDAQ:TSLA), online coupon concern Groupon Inc (NASDAQ:GRPN), and ocean transportation issue DryShips Inc. (NASDAQ:DRYS). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on TSLA, GRPN, and DRYS.

  • TSLA has rallied 74% this year -- and based on Tuesday's close at $261.74, the stock is sitting just 2% away from its Aug. 18 record peak of $267.26. Against this backdrop, option players have been initiating long calls in a flurry, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TSLA's 50-day call/put volume ratio of 1.46 ranks in the bullishly skewed 80th percentile of its annual range. With nearly 27% of the stock's float sold short, it's possible some of this recent call buying is a result of short sellers hedging against any additional upside. Regardless, now is a prime time to scoop up front-month Tesla Motors Inc options at a relative bargain, as the equity's Schaeffer's Volatility Index (SVI) of 33% ranks lower than 98% of similar readings taken in the past year.

  • GRPN tacked on 2% to close the session at $6.46, with the stock breaking north of its 50-day moving average for the first time in three weeks. Year-to-date, though, the shares are still staring at a roughly 45% deficit. In spite of this dismal technical showing, the stock has racked up a 10-day call/put volume ratio of 5.77 on the ISE, CBOE, and PHLX -- which ranks in the 78th annual percentile. As with TSLA, short sellers could be using these long calls to guard against an unexpected rally. At present, 20.7% of Groupon Inc's float is sold short. Meanwhile, front-month GRPN options are pricing in extremely low volatility expectations at the moment -- the equity's SVI of 38% ranks below all comparable readings taken in the last 12 months.

  • At the ISE, CBOE, and PHLX, option traders have bought to open nearly 23 DRYS calls for each put over the past two weeks. What's more, the resultant call/put volume ratio of 22.75 ranks just 10 percentage points from an annual bullish peak. In the front-month series, specifically, call players have targeted the overhead September 3.50 and 4 strikes, where a collective 25,718 contracts are currently in residence. Those purchasing these short-term options are doing so on the cheap, relatively speaking, as DryShips Inc.'s SVI of 45% ranks lower than 93% of similar readings taken over the past 52 weeks. On Tuesday, DRYS closed the session at $3.32 -- 29.4% below its year-to-date breakeven line.

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