Schaeffer's Trading Floor Blog

Options Check-Up: Twitter Inc, Amazon.com, Inc., and Herbalife Ltd.

Analyzing recent option activity for TWTR, AMZN, and HLF

by 7/17/2014 7:40 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are microblogging concern Twitter Inc (NYSE:TWTR), online retailer Amazon.com, Inc. (NASDAQ:AMZN), and nutritional supplements maker Herbalife Ltd. (NYSE:HLF). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on TWTR, AMZN, and HLF.

  • TWTR is tentatively scheduled to take the earnings stage sometime next week. Despite its lackluster price action and earnings history, Twitter Inc option players remain bullishly biased. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open twice as many calls as puts during the past couple of weeks. This sentiment is echoed by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.46, which indicates that calls more than double puts among options expiring within three months. Heading into the microblogging site's expected earnings release, TWTR's short-term options are growing more expensive. The equity's Schaeffer's Volatility Index (SVI) is on the rise, and has nearly doubled since the start of the month, jumping from 36% to 67%. The SVI now stands higher than 43% of all other readings from the past year, suggesting TWTR's short-term options are moderately priced right now, from a historical perspective. At Wednesday's close, the shares were docked at $37.43, a 1.2% loss on the day.

  • AMZN, meanwhile, advanced 0.4% to settle at $355.90, amid reports the company could soon launch a streaming e-book service. During the past 10 weeks, options players have bought to open AMZN calls over puts at a near-annual-high clip; the stock's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.29 stands higher than 98% of all other readings from the past year. As with TWTR, Amazon.com, Inc.'s short-term options are growing increasingly popular ahead of the company's earnings report, slated for release after the close on Thursday, July 24. The security's SVI has jumped from 24% on July 1 to its current perch of 35% -- in the middle of its annual range.

  • Finally, HLF bucked the broad-market trend higher on no apparent news, shedding 4.8% to land at $61.52. The stock has surrendered nearly 22% in 2014, and the options crowd is gambling on even steeper losses for Herbalife Ltd., which will report earnings after the close on Monday, July 28. The equity's 10-day ISE/CBOE/PHLX put/call volume ratio has risen to 4.37 -- just 4 percentage points shy of an annual high. Reflecting the growing demand for HLF's short-term options, the stock's 30-day at-the-money implied volatility popped 19.1% to end at 50.6% on Wednesday.

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