Schaeffer's Trading Floor Blog

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

Analyzing recent option activity for ZNGA, CSCO, and YHOO

by 2/27/2014 6:25 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are online gaming specialist Zynga Inc (NASDAQ:ZNGA), IT services provider Cisco Systems, Inc. (NASDAQ:CSCO), and search engine giant Yahoo! Inc.'s (NASDAQ:YHOO). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on ZNGA, CSCO, and YHOO.

  • ZNGA's options traders have ramped up the bearish ante lately. While the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.25 indicates long calls have quadrupled long puts of late, the ratio ranks in the 69th annual percentile, concluding the recent rate of put buying, relative to call buying, is actually faster than what is typically seen. Nevertheless, no matter what side of the aisle the speculators place their bets, short-term options are more affordable than usual right now, from a volatility standpoint. This is evidenced in the fact that Zynga Inc's Schaeffer's Volatility Index (SVI) of 51% ranks in the 24th percentile of its 12-month range. Meanwhile, on the technical front, the shares have tacked on more than 51% over the past month to perch at $5.21. Plus, yesterday, ZNGA tagged an annual-high of $5.34, after winning the dismissal of a fraud lawsuit from some of its shareholders.

  • Given CSCO's lackluster performance on the charts of late -- the stock has shed more than 6.5% over the past six months to trade at $21.92 -- speculators have bought to open puts, relative to calls, at a notably accelerated pace of late. In fact, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.74 ranks higher than 84% of comparable readings from the past year, highlighting the recent bearishly skewed trend. Now is an opportune time to purchase short-term Cisco Systems, Inc. options, as the stock's SVI of 16% is just 2 percentage points from a 12-month low. In other words, prices on these contracts are nearing annual-low levels, relatively speaking.

  • YHOO's brief pullback in January may have scared option bulls of late, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.60 is just 2 percentage points from a 12-month peak, indicating speculators have picked up long puts, relative to long calls, at a near-annual-high pace during the past two weeks. Since tagging an intraday low of $34.45 on Jan. 30, however, Yahoo! Inc. has rebounded 11.7% to trade at $38.47. Nevertheless, short-term option players can place bets at a relative bargain right now, considering the equity's SVI of 30% ranks in the 22nd annual percentile.

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