Schaeffer's Trading Floor Blog

Options Check-Up: Yahoo! Inc., Keurig Green Mountain Inc, and Big Lots, Inc.

Analyzing recent option activity on YHOO, GMCR, and BIG

by 8/28/2014 7:51 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are Internet issue Yahoo! Inc. (NASDAQ:YHOO), coffee concern Keurig Green Mountain Inc (NASDAQ:GMCR), and discount retailer Big Lots, Inc. (NYSE:BIG). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on YHOO, GMCR, and BIG.

  • YHOO rose 1% on Wednesday to close at $38.18, after Alibaba Group Holding Ltd. -- of which Yahoo! Inc. owns a major stake -- posted a strong quarterly profit. In the stock's options pits, put buyers have been active, despite YHOO's impressive year-over-year gain of 41%. Specifically, the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.37 ranks in the 83rd percentile of its annual range. Front-month YHOO options are pricing in relatively lukewarm volatility expectations at the moment, per the security's Schaeffer's Volatility Index (SVI) of 41%, which ranks in the middling 53rd percentile of its annual range.

  • Call buying has been popular on GMCR of late, as evidenced by the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.83, which ranks higher than 88% of similar readings taken in the past month. This isn't too surprising, though, considering the stock has rallied more than 78% year-to-date to trade at $134.73. With a healthy 8.2% of the security's float sold short, a portion of this activity could be a result of shorts hedging against any additional upside for Keurig Green Mountain Inc. Regardless, now is an opportune time to purchase GMCR's front-month options at a relative bargain, as the stock's SVI of 30% ranks just 7 percentage points from an annual low.

  • Option traders are betting on some earnings-induced upside for BIG, which takes its turn in the earnings confessional Friday morning. At the ISE, CBOE, and PHLX, speculators have bought to open 7.78 BIG calls for every put over the past 50 sessions. What's more, the resultant call/put volume ratio sits just 6 percentage points from a 52-week peak, meaning long calls have been initiated over puts at a near-annual-high clip in recent months. Despite the uncertainty surrounding the scheduled announcement, the stock's SVI of 44% ranks lower than 88% of comparable readings taken in the past year, meaning premium on front-month BIG options are inexpensive at the moment, historically speaking. On Wednesday, Big Lots, Inc. tagged a 16-year peak of $48.52, before settling the session at $47.96. The stock could be poised to extend this record-setting run after it unveils its second-quarter results on Friday. In fact, over the past seven quarters, the security has averaged a single-session post-earnings gain of 4.9% -- including last quarter's 13.1% pop.

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