Schaeffer's Trading Floor Blog

Options Check-Up: Visa Inc, Alcatel Lucent SA (ADR), and The Coca-Cola Company

Analyzing recent option activity for V, ALU, and KO

by 4/10/2014 12:37 PM
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Attracting notable attention from options traders in recent weeks are credit card giant Visa Inc (NYSE:V), telecom concern Alcatel Lucent SA (ADR) (NYSE:ALU), and soft drink heavyweight The Coca-Cola Company (NYSE:KO). Below is a look at how speculators are betting on this trio of names, and how much they are willing to pay to place these bets.

  • V shares have lost some footing of late, slipping south of their 160-day moving average and surrendering nearly 6% of their value since the end of March to perch at $203.42. Against this backdrop, it's no surprise that long puts have been in increasing demand. The equity's 10-day put/call volume ratio -- measuring buy-to-open activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- stands at 0.63. Although long calls continue to be scooped up at a faster absolute pace, relative demand for puts is higher than normal, as the ratio rests in the 67th annual percentile. On the plus side for Visa Inc options buyers is low prices: V's Schaeffer's Volatility Index (SVI) of 22% ranks south of 71% of the past 12 months' worth of readings, signifying that short-term options premium stands at a relative bargain.

  • Up roughly 160% during the last 12 months to $3.88, ALU has actually stumbled so far in 2014 (down 12%), and the options crowd has taken notice. The equity's 50-day ISE/CBOE/PHLX put/call volume ratio of 0.20 ranks in the 80th annual percentile, indicating that long puts are being purchased (relative to calls) at a faster-than-usual clip. Short-term Alcatel Lucent SA (ADR) options are priced attractively, from a volatility perspective. SVI for ALU rests at 47%, which is lower than all but 8% of comparable readings taken during the last year.

  • Puts have also been the options of choice for KO speculators, judging by the 10-day ISE/CBOE/PHLX put/call volume ratio of 0.60, which ranks in the 74th annual percentile. Meanwhile, even with earnings scheduled for next Tuesday, April 15, options prices are relatively cheap. The equity's SVI stands at 17%, lower than 90% of the past year's worth of SVI readings. On the charts, shares of The Coca-Cola Company have shed roughly 5% on a year-to-date basis, coming to rest at $39.38. As noted, the Dow component will visit the earnings confessional on Tuesday ahead of the open to disclose its first-quarter results. Analysts are expecting a per-share profit of 46 cents, in line with KO's year-ago outcome.

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