Schaeffer's Trading Floor Blog
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Among the stocks attracting attention from options traders lately are software tycoon Microsoft Corporation (NASDAQ:MSFT), yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU), and wireless communications provider Verizon Communications Inc. (NYSE:VZ). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on MSFT, LULU, and VZ.

  • MSFT -- which reports fiscal second-quarter earnings after the close on Thursday -- has been very popular among option bulls of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day call/put volume ratio of 2.74, ranking in the 88th annual percentile. This shows MSFT calls have been bought to open over puts at a much faster rate than usual recently. Option players are willing to pay a pretty penny for their bets on Microsoft Corporation. In fact, Schaeffer's Volatility Index (SVI) for the stock -- which is up 32.7% year-over-year to trade at $36.17 -- is 28%, and ranks higher than 79% of comparable readings from the past year.

  • Though LULU has already lost 18.9% year-to-date to trade at $47.85, its 10-day ISE/CBOE/PHLX call/put volume ratio of 2.27 is 12 percentage points from an annual high. This means LULU calls have been much more in-demand than usual, relative to puts, during the past two weeks. Considering nearly 16% of the stock's float is sold short, a portion of this activity -- particularly at out-of-the-money strikes -- could be at the hands of short sellers looking to hedge against a rebound. Regardless, now is an opportune time to place bets on Lululemon Athletica inc. Its SVI of 31% sits in the bottom 8% of its 12-month range, indicating short-term options are very cheap, from a volatility perspective.

  • VZ shed 1.3% today to perch at $47.70, following Tuesday morning's fourth-quarter earnings report. Heading into the scheduled announcement, the equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.11 ranked in the 85th percentile of its 12-month range, meaning option traders placed bearish bets over bullish at an accelerated rate during the past two weeks. Given that Verizon Communications Inc.'s SVI of 18% sits in the 41st annual percentile, option prices are leaning toward the affordable side right now.

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