Schaeffer's Trading Floor Blog

Options Check-Up: Cree, Inc., Facebook Inc (FB), and Sohu.com Inc

Analyzing recent option activity for CREE, FB, and SOHU

by 2/7/2014 7:16 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are semiconductor specialist Cree, Inc. (NASDAQ:CREE), social media giant Facebook Inc (NASDAQ:FB), and Chinese media website Sohu.com Inc (NASDAQ:SOHU). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on CREE, FB, and SOHU.

  • Although CREE has dropped 13.6% from its Jan. 22 high of $67.98 to trade at $58.76, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been particularly bullish toward the stock of late. In fact, the equity's 10-day call/put volume ratio at these exchanges comes in at 3.72, which ranks in the 80th annual percentile -- highlighting a stronger-than-usual preference for long calls over long puts. However, with 9.8% of Cree, Inc.'s float sold short, it is possible that some of this call activity was actually the work of short sellers hedging against potential near-term upside. Meanwhile, according to the stock's Schaeffer's Volatility Index (SVI) of 37% -- which ranks 14 percentage points from a 12-month low -- short-term speculators are purchasing contracts at a bargain right now, from a volatility standpoint.

  • FB's strong technical showing has continued into 2014, with the shares up 13.7% year-to-date to trade at $62.16. While the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.61 suggests call-skewed activity on an absolute basis, the ratio ranks in the 45th percentile of its annual range, indicating speculators have actually bought to open calls over puts at a slightly slower-than-usual rate recently. Nevertheless, short-term options on Facebook Inc are very affordable right now, considering the equity's SVI of 42% ranks lower than 69% of comparable readings from the past year.

  • Bearish betting has ramped up on SOHU during the past two weeks, as the company prepares for its fourth-quarter earnings report on Monday morning. To be specific, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.48 ranks higher than 73% of similar readings from the past 12 months. These pre-earnings bettors are willing to pay a pretty penny for these contracts, given that the equity's SVI of 69% ranks just 2 percentage points from an annual high. Meanwhile, on the charts, Sohu.com -- perched at $70.39 -- is looking at a three-month gain of 12%.

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