Schaeffer's Trading Floor Blog

Stocks to Watch Tuesday: DreamWorks Animation SKG, Inc., Zynga Inc, and Williams Companies, Inc.

Analyzing DWA, ZNGA, and WMB ahead of tomorrow's trading

by 6/16/2014 4:39 PM
Stocks quoted in this article:

Momentum names that made notable moves on Monday and could continue to do so into Tuesday's session are movie maker DreamWorks Animation SKG, Inc. (NASDAQ:DWA), social game concern Zynga Inc (NASDAQ:ZNGA), and energy issue Williams Companies, Inc. (NYSE:WMB). Here is a quick look at these stocks ahead of tomorrow's opening bell.

DreamWorks Animation SKG, Inc. (NASDAQ:DWA)

DWA gave up 11% to settle at $24.35, after a lackluster opening weekend for How To Train Your Dragon 2 sparked a wave of downwardly revised box-office estimates for the film. As a result, the shares ended up on the short-sale restricted list, sending bears to the options pits instead. Put volume traded at seven times the average daily pace, and outnumbered calls by a more than 2-to-1 margin. Even before today's gap lower, however, DWA option traders were skeptical. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 4.44 stands just 4 percentage points from an annual peak. In other words, option buyers have picked up DWA puts over calls at a much faster-than-usual pace during the past two weeks.


ZNGA dropped 0.7% to end at $3.08, after the firm Friday night said it's no longer in compliance with Nasdaq listing rules, due to the exit of two independent board directors (one of whom is DWA CEO Jeffrey Katzenberg). The company now has until July 27 to submit an outline for regaining compliance. The security's struggles on and off the charts likely aren't sitting well with the recent crop of call buyers. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 8.39 stands higher than 72% of all other readings from the past year, pointing to a bigger-than-usual call bias among option buyers of late. In the same vein, daily call volume nearly tripled put volume today -- though the relative disinterest in long puts is somewhat understandable, as profit potential is limited due to ZNGA's relatively low share price.

Williams Companies, Inc. (NYSE:WMB)

WMB settled 18.7% higher at $56.02 -- and touched a record peak of $59.68 in intraday action -- thanks to the company's plans to pay almost $6 billion for a controlling stake in Access Midstream Partners LP (NYSE:ACMP). ). The stock received subsequent upgrades at Tudor Pickering and Jefferies, and Maxim Group said WMB plans to hike its third-quarter dividend by 32%, and could continue to raise its dividend for the next several years. Against this backdrop, demand for the firm's short-term options skyrocketed, as the equity's 30-day at-the-money implied volatility shot 53.8% higher to 25.3%. However, the January 2015 calls garnered the most attention, as one trader may have rolled his bullish position by taking profits on 5,000 50-strike calls, and buying to open 5,000 60-strike calls in the same series. Elsewhere, short sellers may be kicking rocks; short interest soared nearly 41% during the past two reporting periods.

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