Schaeffer's Trading Floor Blog

Options Check-Up: Alcatel Lucent SA (ADR), Hewlett-Packard Company, and AOL, Inc.

Analyzing recent option activity for ALU, HPQ, and AOL

by 12/6/2013 7:48 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are telecom concern Alcatel Lucent SA (ADR) (NYSE:ALU), tech firm Hewlett-Packard Company (NYSE:HPQ), and Internet issue AOL, Inc. (NYSE:AOL). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for bets on ALU, HPQ, and AOL.

  • Amid reports that ALU will reclaim a spot on the French CAC 40, the equity rallied to a new two-year peak of $4.55 on Thursday, before eventually settling at the $4.51 mark. The positive price action most likely pleased bulls that have been accumulating positions on Alcatel Lucent SA (ADR) in recent weeks. During the course of the past 10 sessions, in fact, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 34.37 calls on ALU for every put. This ratio ranks in the 75th percentile of its annual range, meaning long calls have been initiated over puts at an accelerated clip of late. Near-term traders are picking up these bets at a relative bargain, per the stock's Schaeffer's Volatility Index (SVI) of 47%, which ranks in the tame 9th percentile of its annual range.

  • Calls have also been popular on HPQ, as evidenced by the security's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.48, which ranks higher than 80% of similar readings taken over the last 12 months. Simply stated, calls have been bought to open over puts with more rapidity just 20% of the time within the past year. Since Hewlett-Packard Company unveiled its quarterly earnings report in late November, the equity's SVI has been on the decline, dropping to 0.27 from its Nov. 26 reading of 0.46. The current ratio ranks lower than 93% of similar readings taken in the past year, suggesting short-term options are rather affordable at the moment, from a volatility perspective. HPQ closed Thursday's session at the $27.25 mark.

  • AOL option traders have shown a preference for calls over puts in recent weeks, as well. At the ISE, CBOE, and PHLX, the stock has tallied a 10-day call/put volume ratio of 2.19, which ranks in the bullishly skewed 69th percentile of its annual range. On the charts, the security has tacked on almost 48% year-to-date to linger near $43.80, yet short interest accounts for a lofty 11.4% of the equity's available float. Given AOL's impressive technical showing, a portion of the recent call buying -- especially at out-of-the-money strikes -- could be the result of shorts hedging their bearish bets against an extended uptrend. Regardless of the motive, AOL, Inc.'s short-term options are relatively cheap, considering the security's SVI of 32% sits just 10 percentage points from a 52-week low.

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