Schaeffer's Trading Floor Blog

Options Check-Up: Twitter Inc (TWTR), Cree, Inc., and The Fresh Market Inc

Analyzing recent option activity for TWTR, CREE, and TFM

by 3/5/2014 5:00 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are microblogging site Twitter Inc (NYSE:TWTR), semiconductor specialist Cree, Inc. (NASDAQ:CREE), and grocery chain The Fresh Market Inc (NASDAQ:TFM). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on TWTR, CREE, and TFM.

  • Though TWTR experienced earnings-induced turbulence on the charts in early February, the stock has since been on the rebound, advancing 8.8% from its Feb. 6 intraday low of $49.99 to perch at $54.38. With that being said, the equity boasts a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.42, with long calls outnumbering long puts by a margin of almost 3-to-2 during the past two weeks. Considering 15.6% of Twitter Inc's float is sold short, some of this call activity could be attributed to short sellers hedging against more upside in the near term. Regardless of motive, short-term speculators can purchase options at a relative discount, from a volatility perspective, as the stock's Schaeffer's Volatility Index (SVI) of 47% ranks lower than 94% of comparable readings from the past year.

  • Recent option traders have been relatively bullish toward CREE, which has edged a modest 6% higher over the past month to trade at $60.53. In fact, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.64 ranks in the 59th annual percentile, demonstrating calls have been bought to open over puts at a slightly faster-than-usual pace of late. Now is an opportune time to buy short-term options on Cree, Inc. The stock's SVI of 34% ranks 9 percentage points from a 12-month low, meaning these contracts are very affordable right now, relatively speaking.

  • TFM option players have been aligning themselves on the bearish side of the aisle, ahead of the company's fourth-quarter earnings report tomorrow evening. This is evidenced by the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.19, which ranks in the 84th percentile of its 12-month range -- meaning bearish bets have been placed over their bullish counterparts at an accelerated rate recently. With The Fresh Market Inc's quarterly review right around the corner, the equity's SVI of 69% ranks higher than 75% of similar readings from the past year, indicating premium on front-month options is relatively expensive right now. On the charts, TFM is looking at a year-to-date loss of 14.2% to trade at $34.74.

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