Schaeffer's Trading Floor Blog

Options Check-Up: Bank of America Corp (BAC), Groupon Inc (GRPN), and Zynga Inc (NASDAQ:ZNGA)

Drilling down on recent option activity for BAC, GRPN, and ZNGA

by 10/15/2013 9:08 AM
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Among the stocks attracting attention from options traders lately are blue-chip lender Bank of America Corp (NYSE:BAC), daily deals site Groupon Inc (NASDAQ:GRPN), and online gaming specialist Zynga Inc (NASDAQ:ZNGA). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bullish and bearish bets on BAC, GRPN, and ZNGA.

  • During the past 10 days, options traders on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 2.98 calls for every put on BAC. This ratio arrives in the 58th annual percentile, indicating a slightly stronger-than-usual preference for calls over puts. Schaeffer's Volatility Index (SVI), meanwhile, stands at 25%, in the 24th annual percentile -- suggesting near-term options are relatively cheap right now, from a volatility perspective. Looking ahead, Bank of America Corp is set to report its third-quarter earnings tomorrow before the opening bell rings.

  • GRPN sports a 10-day ISE/CBOE/PHLX call/put volume ratio of 2.53, but this reading arrives in the mild 36th annual percentile. So, while calls bought to open have outnumbered puts, these bullish bets are actually less popular than usual, on a relative basis. The stock's SVI is currently docked at 81%, but this figure ranks higher than only 30% of comparable readings over the past year. In other words, near-term options on Groupon Inc have been a better bargain less than one-third of the time, despite the company's fast-approaching earnings report.

  • Puts are emerging as the options of choice on ZNGA, as evidenced by the equity's 10-day put/call volume ratio of 0.31 on the ISE, CBOE, and PHLX. While this ratio may seem slim, it ranks in the bearishly slanted 87th annual percentile, as traders have rarely scooped up puts over calls at a faster clip. Meanwhile, the stock's SVI has risen from 66% at the start of October to its current perch at 73%, which arrives in the 38th percentile of its annual range -- pointing to rising demand for options on Zynga Inc.

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