Schaeffer's Trading Floor Blog

Options Check-Up: Twitter Inc, Yahoo! Inc., and Cisco Systems, Inc.

Analyzing recent option activity for TWTR, YHOO, and CSCO

by 5/22/2014 5:26 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are microblogging site Twitter Inc (NYSE:TWTR), Internet tycoon Yahoo! Inc. (NASDAQ:YHOO), and IT services provider Cisco Systems, Inc. (NASDAQ:CSCO). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on TWTR, YHOO, and CSCO.

  • Although down 50.5% year-to-date to trade at $31.52, TWTR has seen more bullish bets made than bearish in its options pits of late. In fact, according to the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.63, 163 TWTR calls have been bought to open for every 100 puts during the past two weeks. With nearly 15% of TWTR's float sold short, though, a portion of this activity could be the result of short sellers looking to hedge against any unexpected upside. Those looking to snatch up front-month bets on Twitter Inc can do so at a discount, from a volatility perspective, as the stock's Schaeffer's Volatility Index (SVI) of 43% ranks lower than 94% of comparable readings from the past year.

  • On the other hand, YHOO -- which is up over 30% year-over-year to linger near $34.70 -- has seen an uptick in bearish activity (compared to bullish) in its options pits recently. To be more specific, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.42 ranks in the top 14% of its 12-month range. In other words, while long calls outnumber puts on an absolute basis, the latter have been scooped up at an accelerated clip in recent sessions. Furthermore, SVI on Yahoo! Inc. comes in at 29%, ranking in the 17th annual percentile. This means short-term YHOO options are attractively priced right now, relatively speaking.

  • Finally, CSCO puts have been bought to open over calls at a near-annual-high rate during the past two weeks, as evidenced by the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.08, which ranks just 4 percentage points from a 12-month peak. Now is an opportune time to purchase short-term options on Cisco Systems, Inc., which has advanced about 10% over the last three months to perch at $24.38. The stock's SVI of 14% ranks in the bottom 2% of its annual range, meaning front-month contracts have rarely been as inexpensive as they are now, from a historical standpoint.
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