Schaeffer's Trading Floor Blog

Stocks to Watch Thursday: Valero Energy Corporation, Zillow Inc, and Avon Products, Inc.

Analyzing VLO, Z, and AVP ahead of tomorrow's trading

by 1/29/2014 4:44 PM
Stocks quoted in this article:

Momentum names that made notable moves on Wednesday and could continue to do so into Thursday's session include petroleum refiner Valero Energy Corporation (NYSE:VLO), real estate concern Zillow Inc (NASDAQ:Z), and beauty products specialist Avon Products, Inc. (NYSE:AVP). Here is a quick look at these stocks ahead of tomorrow's opening bell.

Valero Energy Corporation (NYSE:VLO)

Valero's fourth-quarter earnings report led the shares 2.4% higher to finish the session at $51.40. In response, speculators flooded VLO's options pits, snatching up 1.6 times as many contracts as usual. In particular, the traders zeroed in on short-term calls, which made up seven of the day's 10 most active strikes. This preference for calls expiring within the next three months is fairly typical in Valero's options pits of late. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.45 sits 1 percentage point from an annual low, meaning short-term traders have rarely been more call-focused toward VLO over the past year.

Zillow Inc (NASDAQ:Z)

Zillow dropped 5.2% today to close at $79.00, representing a change of pace for the stock, which boasts a year-over-year gain of 123.5%. In light of such technical stamina, option traders have upped the bullish ante on Z. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.18 is just 9 percentage points from a 12-month peak, indicating calls have been bought to open over puts at a near-annual-high rate over the past two weeks. Given that 26.1% of Zillow's shares are sold short, perhaps the recent increase in call buying is actually the work of short sellers hedging against future upside, particularly an earnings-induced bounce following its tentatively scheduled Feb. 10 report.

Avon Products, Inc. (NYSE:AVP)

Avon hit an annual low of $14.69 today -- after an article in Women's Wear Daily (subscription required) suggested Avon France is looking to enter receivership -- before finishing the session with a 5.7% loss at $14.76. Put players subsequently poured into AVP's options pits, and by the end of the day, 17,000 puts had been exchanged, which quadruples the average daily amount. To be specific, eight of the 10 most active options were puts, with the March 16 strike leading the way. The majority of the contracts traded at the strike appear to have been bought to open, indicating speculators anticipate extended losses for the stock. Over the past three months, AVP has shed 34%.


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