Schaeffer's Trading Floor Blog
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Among the stocks attracting attention from options traders lately are solar power concern JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO), microblogging platform Twitter Inc (NYSE:TWTR), and the iShares Silver Trust (ETF) (NYSEARCA:SLV). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on JASO, TWTR, and SLV.

  • Long puts on JASO have more than quadrupled long calls during the past two weeks, resulting in a 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 4.52, which ranks the highest of all other comparable readings from the past 12 months. In other words, the recent rate of put buying, relative to call buying, is at an annual-high level. This is somewhat surprising, considering JA Solar Holdings Co., Ltd. (ADR) has jumped 23.7% from its April 11 intraday low of $9.20 to its current perch at $11.38. Nevertheless, from a volatility perspective, short-term JASO speculators are picking up contracts at a discount, as the equity's Schaeffer's Volatility Index (SVI) of 64% ranks in the bottom 15% of its annual range.

  • Meanwhile, TWTR -- which is heading into the earnings confessional after the close next Tuesday, April 29 -- has seen more calls bought to open than puts during the past 10 trading days, resulting in an ISE/CBOE/PHLX call/put volume ratio of 1.33. Those purchasing front-month options on Twitter Inc ahead of its quarterly event have been paying a pretty penny, relatively speaking, as the stock's SVI of 83% ranks higher than 65% of comparable readings from the past year. Meanwhile, on the charts, TWTR shares are staring at a 29.6% year-to-date deficit to trade at $44.82. With that being said, perhaps some of the recent call buyers were actually short sellers in disguise, hedging against a potential rebound (or post-earnings pop) -- short interest currently accounts for 11.6% of the equity's float.

  • While calls have been the options of choice on SLV for quite some time, put players have upped their presence in the stock's options pits of late, as the equity has fallen 9.6% from its March 14 intraday high of $20.92 to trade at $18.92. To be specific, SLV's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.37 ranks in the 66th annual percentile, indicating puts have been bought to open, relative to calls, at an accelerated rate during the past two weeks. Currently, SVI on the iShares Silver Trust (ETF) is sitting at 22%, just 8 percentage points from a 12-month low. In other words, front-month SLV contracts are relatively inexpensive.

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Stocks to Watch Friday: Micron Technology, Inc., SINA Corp, and D.R. Horton, Inc.

Analyzing MU, SINA, and DHI ahead of tomorrow's trading

by 4/24/2014 5:35 PM
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Momentum names that made notable moves on Thursday and could continue to do so into Friday's session include semiconductor concern Micron Technology, Inc. (NASDAQ:MU), Chinese online media company SINA Corp (NASDAQ:SINA), and homebuilder D.R. Horton, Inc. (NYSE:DHI). Here is a quick look at these stocks ahead of tomorrow's opening bell.

Micron Technology, Inc. (NASDAQ:MU)

Micron Technology has been an unstoppable force on the charts since April 15, when the company announced its collaboration with Wave Systems Corp. (NASDAQ:WAVX) to strengthen user protection against data management threats. Today, MU shares went further into decade-plus-high territory, maxing out at $26.62, before settling the session 0.3% below breakeven, at $26.16. Over the past seven sessions, the shares have added 19.5%. Meanwhile, in MU's options pits, calls traded at an 66% mark-up to the average daily rate, and by the end of the session, call volume had outpaced put volume by a roughly 3-to-1 margin. In fact, seven of the day's 10 most active MU options were calls that expire within the next three months. It is possible that some of the day's call players were actually short sellers hedging against more upside, as short interest on Micron Technology currently accounts for a lofty 11.9% of the stock's float.


SINA fell 3.1% today to close at $51.64, after being stripped of its online publication license for having "lewd and pornographic content" on its site. Option traders responded to the news by upping the bearish ante on the stock, which now faces a significant year-to-date deficit of 40%. Put volume spiked to nearly two times the average daily amount, with the weekly 4/25 50 strike seeing the most action on that side of the aisle. It seems as though speculators bet on a drop below the $50 level through tomorrow's close, as it appears a healthy portion of contracts at this strike were likely bought to open.

D.R. Horton, Inc. (NYSE:DHI)

D.R. Horton surged 8.3% today to close at $23.13, thanks to a fiscal second-quarter earnings report that beat analysts' estimates. While DHI made its way 3.6% above its year-to-date flat line, option traders exchanged roughly four times the expected daily amount of calls. Considering short interest on DHI represents 6.5 sessions' worth of pent-up buying demand, at the shares' average daily volume, some of today's heavy call activity could have come at the hands of short sellers picking up options-related insurance against continued gains.

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Earnings on Deck: Ford Motor Company, Colgate-Palmolive Company, and Tyco International Ltd.

Previewing F, CL, and TYC ahead of their upcoming earnings reports

by 4/24/2014 2:19 PM
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Wall Street is knee-deep in big-time earnings reports, though a few notable names are still waiting on deck. Among them are automaker Ford Motor Company (NYSE:F), consumer products concern Colgate-Palmolive Company (NYSE:CL), and security services provider Tyco International Ltd. (NYSE:TYC). Here's a quick look at these names as earnings approach.

  • Ford Motor Company (NYSE:F) will release its first-quarter earnings before the open tomorrow. While the Detroit darling has bested the Street's per-share profit predictions in each of the past eight quarters, the shares average a loss of 0.9% one week after reporting. In fact, F plummeted 7.4% in the five sessions after its last earnings release in late January. Nevertheless, pre-earnings call buying has hit fever pitch on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where F's 10-day call/put volume ratio sits at a 52-week high of 8.16. In other words, option buyers have picked up Ford calls over puts at an annual-high clip during the past couple of weeks. Plus, half the covering analysts consider F worthy of a "buy" or better rating, with the other half doling out lukewarm "holds." Should Ford Motor Company suffer yet another post-earnings drop, a mass exodus of option bulls and/or a round of downgrades could exacerbate selling pressure on the shares. At last check, F is 0.8% higher at $16.36.

  • Colgate-Palmolive Company (NYSE:CL) will also unveil its first-quarter figures ahead of the bell tomorrow. The company has matched or exceeded analysts' bottom-line estimates in seven of the past eight quarters, resulting in an average one-week post-earnings gain of 0.9% for CL. Options traders have been upping the bullish ante, as the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 1.81 stands higher than 71% of comparable readings from the past year. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.53 sits just 1 percentage point from an annual nadir, implying that short-term speculators have rarely been more call-biased during the past year. In afternoon action, CL is up 0.4% at $66.13.

  • Finally, Tyco International Ltd. (NYSE:TYC) will report fiscal second-quarter earnings before the open tomorrow. The company has met or surpassed the Street's per-share profit projections in seven of the past eight quarters, averaging a gain of 1.3% in the subsequent week. Speculators on the ISE, CBOE, and PHLX have bought to open nearly 15 TYC calls for every put during the past 10 sessions, and the resulting 10-day call/put volume ratio of 14.61 ranks in the 71st percentile of its annual range. As a result, the security's SOIR stands at 0.20, indicating that short-term calls outnumber puts by a 5-to-1 margin. This ratio sits higher than just 2% of all other readings from the past year, suggesting short-term options traders are more call-heavy than usual ahead of earnings. At last check, TYC has surrendered 0.5% to trade at $42.21.

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Midday Market Stats: Dow Jones Industrial Average Heads Higher as Investors Digest News on All Fronts

Thermo Fisher Scientific Inc. attracts call players after earnings, while Zimmer Holdings, Inc. spikes to a new high on M&A news

by 4/24/2014 11:57 AM
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After spending much of the morning treading water south of breakeven, the Dow Jones Industrial Average (INDEXDJX:.DJI) is now moderately higher at midday, up 19.8 points, or 0.1%, at 16,521.50. In addition to a number of high-profile earnings reports, investors are also weighing an upbeat durable-goods reading against anxiety over the escalating tension between Russia and Ukraine and a larger-than-forecast rise in weekly jobless claims.

Here are a few noteworthy stats at midday:

  1. The equity put/call volume ratio across all 12 options exchanges stands near 0.70. Roughly 4.55 million calls have changed hands so far today, versus 3.18 million puts.

  2. Thermo Fisher Scientific Inc. (NYSE:TMO) is seeing elevated option activity today, with volume running at more than four times the typical intraday pace. What's more, nearly 93% of the trades have been placed on the call side. TMO shares are down 3.2% today at $115.63 despite the company reporting first-quarter earnings that topped analysts' estimates and lifting its guidance for 2014.

  3. The advance/decline ratio on the New York Stock Exchange (NYSE) stands at 1.28. Advancing stocks are currently outpacing declining issues by a margin of more than 6-to-5.

  4. One of the top movers on the NYSE today is Zimmer Holdings, Inc. (NYSE:ZMH). The medical-equipment concern is currently up 12.8% at $103.19, and earlier today pegged a new all-time high of $108.33. The company has announced plans to acquire orthopedic products company Biomet Inc. for roughly $13.4 billion in cash and stock.

  5. The CBOE Volatility Index (VIX) has inched higher today as stocks fluctuate around the breakeven mark. At last check, the market's "fear gauge" was up 0.1 point, or 0.8%, at 13.36.

  6. The put/call volume ratio on the iPath S&P 500 VIX Short-Term Futures ETN (NYSEARCA:VXX) stands at 0.32, with calls outpacing puts by a hefty margin. The ETN is up 0.3% today at 41.25.

View a real-time chart of the Dow Jones Industrial Average (INDEXDJX:.DJI).

Unusual Option Volume at Midday

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Melco Crown Entertainment Ltd (ADR) (MPEL) Struggles Don't Sway Bulls

MPEL could be poised for technical headwinds, should bulls start to jump ship

by 4/24/2014 11:52 AM
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Over the course of the past five sessions, Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) option players at the International Securities Exchange (ISE) have shown a distinct preference for calls over puts. Specifically, 4,884 calls have been bought to open, compared to just 30 puts, resulting in a bullishly skewed call/put volume ratio of 162.80.

Widening the scope to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) -- and expanding the time frame to two weeks -- yields a similarly optimistic stance. In fact, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 6.59 (up from its month-ago reading of 0.46) ranks in the 80th percentile of its annual range. Simply stated, calls have been bought to open over puts with more rapidity just 20% of the time within the past year.

This glass-half-full mindset has spilled outside of the options arena, as well. For starters, short interest plunged 22% in the latest reporting period, and now accounts for a low 1.2% of the stock's available float. Not only was MPEL unable to capitalize on this burst of buying power (the equity is down 11% from March 17), but -- at current levels -- there is little in the way of available sideline cash to help fuel any future rally attempts.

Additionally, 11 out of 12 analysts maintain a "strong buy" recommendation for the equity, with the sole "dissenter" awarding the stock with a "buy" rating. Plus, the consensus 12-month price target of $49.60 stands at a stiff 34% premium to MPEL's present price of $37.14, as well as in territory yet to be charted by the stock.

Looking at the charts reveals MPEL's price action doesn't warrant such bullish speculation. As touched upon, the equity has struggled over the past month or so, in spite of all of the short-covering activity. However, this sell-off started weeks before, after MPEL topped out at a record peak of $45.70 on March 5, and since hitting that notable mark, the stock has shed 19%. More recently, the equity's two rally attempts in April were quickly contained by MPEL's descending 32-day moving average -- a trendline that previously served as support in February.

From a contrarian perspective, such bullish sentiment surrounding an underperforming stock could have bearish implications going forward. In other words, an unwinding of the optimism toward MPEL both in and out of the options arena could translate into headwinds for the stock down the road.

What's more, the casino operator is scheduled to report earnings on Thursday, May 8. Despite exceeding consensus bottom-line estimates in six of the past eight quarters, the stock has gone on to shed an average of 0.5% and 1.4% in the subsequent day and week, respectively. For its first quarter, the expectation is for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) to bank a 41-cent per-share profit -- a nearly 71% improvement over year-ago results.

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