Schaeffer's Trading Floor Blog

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

Analyzing recent option activity for ZNGA, CREE, and YHOO

by 3/26/2014 5:02 PM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are online gaming expert Zynga Inc (NASDAQ:ZNGA), semiconductor specialist Cree, Inc. (NASDAQ:CREE), and digital content provider Yahoo! Inc. (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, CREE, and YHOO.

  • Option traders were more bullish than usual toward ZNGA ahead of rival King Digital Entertainment PLC's (NYSE:KING) IPO debut today. Over the past 10 trading days, Zynga Inc racked up an International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 7.62, which ranks in the 62nd annual percentile (though some of this may be the result of short sellers hedging their bets, as 7.6% of the stock's float is sold short). This demonstrates that calls have been bought to open over puts at an accelerated pace of late, relatively speaking. Prices on short-term ZNGA options are more affordable than usual right now, from a volatility perspective, as the equity's Schaeffer's Volatility Index (SVI) of 58% ranks in the 35th percentile of its 12-month range. Of note, KING's less-than-stellar debut performance spurred others in the Internet sector to tumble. This includes ZNGA, which plunged 4.1% to close at $4.64.

  • Though CREE has lost more than 8% over the past month to trade at $57.77, the stock maintains a 10-day ISE/CBOE/PHLX call/put volume ratio of 5.70, which ranks 6 percentage point from a 12-month peak. In other words, speculators' preference for long calls over long puts is nearing annual-high levels -- again, however, some of this may be driven by short sellers, since 9.2% of the equity's float is sold short. Now is an opportune time to purchase short-term contracts at an inexpensive rate, relatively speaking, considering Cree, Inc.'s SVI of 35% ranks lower than 90% of similar readings from the past year.

  • Finally, YHOO -- which is up 52.3% year-over-year to trade at $35.45 -- has experienced a wave of bullish betting in its options pits of late. Specifically, the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.08 ranks in the 74th annual percentile, indicating the recent pace of call buying, relative to put buying, is faster than usual. Meanwhile, SVI for Yahoo! Inc. comes in at 37%, which ranks in the 43rd percentile of its 12-month range. As such, the equity's short-term options are slightly less expensive than normal, based on current volatility levels.

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