Schaeffer's Trading Floor Blog

Option Volume Soars as Outerwall Inc (OUTR) Slumps

Outerwall Inc (OUTR) is down more than 17% on news of a CEO split

by 1/20/2015 1:25 PM
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Outerwall Inc (NASDAQ:OUTR) has joined Kite Pharma Inc (NASDAQ:KITE) as one of the leading laggards on the Nasdaq today, with the shares of OUTR off 17.5% to trade at $64.13. Prompting the bearish gap was news that CEO J. Scott Di Valerio has resigned after just two years on the job, and will be replaced on an interim basis by board member Nora Denzel. Against this backdrop, the stock has been placed on the short-sale restricted list, and options volume is running at three times the average intraday pace.

Prior to today's news, traders were showing a distinct bias toward puts over calls among options set to expire in three months or less. Specifically, the equity's Schaeffer's put/call open interest ratio (SOIR) of 4.30 ranks above all other readings taken in the past year. This is just more of the same, though, as put open interest among all of OUTR's options outweighs call open interest by a nearly 3-to-1 margin.

However, call players have been busy in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), OUTR's 10-day call/put volume ratio has surged to 1.98 from 0.14 at the start of the calendar year. What's more, the current ratio ranks in the 94th annual percentile, meaning calls have been bought to open over puts with more rapidity just 6% of the time within the past year.

Heading into today's session, Outerwall Inc (NASDAQ:OUTR) had been racing up the charts since hitting an annual low of $51.17 on Oct. 10, and tagged a record high of $77.94 last Friday. As such, a portion of the recent call buying may have been at the hands of short sellers hedging against any additional upside, considering nearly 47% of the stock's float is sold short.

Daily Chart of OUTR Since October 2014

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Why More Downside Could Be Ahead for Time Warner Inc. (TWX)

Time Warner Inc (TWX) option traders have shown a preference for bearish bets over bullish

by 1/20/2015 10:58 AM
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Time Warner Inc (NYSE:TWX) is down 3.3% to test support at the round-number $80 mark, after Morgan Stanley cut its rating on the stock to "equal weight" from "overweight," and slashed its price target by $5 to $85. The news is likely being met by cheers from options traders, who have been piling up on long puts in recent months.

Specifically, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.79 ranks in the 89th annual percentile. In other words, puts have been bought to open over calls with more rapidity just 11% of the time within the past year.

Echoing this put-skewed preference is TWX's Schaeffer's put/call open interest ratio (SOIR) of 1.30. Not only does this show that puts outweigh calls among options set to expire in three months or less, but it ranks higher than 87% of similar readings taken in the past year. Simply stated, short-term speculators are more put-heavy than usual toward TWX.

This skepticism hasn't spilled outside of the options pits, though. In fact, 21 out of 24 covering analysts maintain a "buy" or better rating, with not a single "sell" to be found. Plus, the consensus 12-month price target of $92.22 stands at a 14.7% premium to TWX's current price at $80.38, as well as in territory not charted since August 2001. Should the shares extend their recent slide -- TWX is off 8% from its Dec. 29 high at $87.44 -- an additional round of downgrades and/or price-target cuts could be on the horizon.

On the fundamental front, Time Warner Inc's (NYSE:TWX) American Sniper is garnering buzz due to its impressive opening weekend. However, the content of the film is being met with mixed reactions from some of Hollywood's most recognizable names. Meanwhile, the firm could have some new competition, after, Inc. (NASDAQ:AMZN) unveiled its newest venture.

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Pre-Earnings Option Bulls Flock to Netflix, Inc. (NFLX)

The brokerage bunch is divided on Netflix, Inc. (NFLX)

by 1/20/2015 10:42 AM
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Netflix, Inc. (NASDAQ:NFLX) is slated to step into the earnings confessional tonight, and ahead of this event, sentiment is mixed. On the one hand, options traders have displayed optimism toward the streaming content provider; on the other, the brokerage bunch is split in its collective outlook on the shares.

Diving right in, NFLX boasts a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.08. This indicates option buyers have preferred calls over puts in recent months. More significantly, the ratio outstrips 96% of all comparable readings from the previous year, suggesting a much healthier-than-usual appetite for bullish bets over bearish.

However, as alluded to earlier, the brokerage crowd isn't nearly as sanguine toward NFLX. Of the 30 analysts following the stock, 15 have doled out "buy" or better recommendations, while the other 15 have handed out "hold" or worse ratings.

Technically speaking, NFLX has been less than impressive over the long term. Currently sitting at $336.88, the equity has advanced just 2.5% on a year-over-year basis.

Additional losses could be in store following tonight's trip under the earnings spotlight. In the session following last October's report, NFLX lost 19.4%. More volatility could be in store tonight, with the options market pricing in a one-day post-earnings swing of 10.6%. That seems about right, historically speaking, as the shares have averaged a single-session move of 16% following the company's last eight quarterly reports.

In other news,, Inc. (NASDAQ:AMZN) upped the ante in its rivalry with Netflix, Inc. (NASDAQ:NFLX). The former announced plans to push further into the original content space with its Amazon Original Movies initiative.

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Analyst Upgrades: T-Mobile US Inc, Isis Pharmaceuticals, Inc., and PepsiCo, Inc.

Analysts upwardly revised their ratings on T-Mobile US Inc (TMUS), ISIS Pharmaceuticals, Inc. (ISIS), and PepsiCo, Inc. (PEP)

by 1/20/2015 9:37 AM
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Analysts are weighing in today on wireless issue T-Mobile US Inc (NYSE:TMUS), drugmaker ISIS Pharmaceuticals, Inc. (NASDAQ:ISIS), and beverage giant PepsiCo, Inc. (NYSE:PEP). Here's a quick roundup of today's bullish brokerage notes on TMUS, ISIS, and PEP.

  • TMUS was upgraded to "buy" from "neutral" at Goldman Sachs, which likewise bumped its price target to $37 from $27. Accordingly, the shares are nearly 2% higher out of the gate, adding to their 2015 outperformance -- specifically, T-Mobile US Inc has advanced roughly 10% since the start of the year to rest at $29.70. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), however, skepticism has been strong. The stock's 10-day put/call volume ratio across these exchanges is 14.51 -- or just 1 percentage point from an annual peak. It's possible some of these bearish bettors are TMUS shareholders hedging against unexpected downside.

  • ISIS, which has rallied more than 44% year-over-year to trade at $69.16, saw its price target raised to $68 from $40 at Leerink, which reiterated its "market perform" assessment. Optimism has been fairly common on the outperforming shares. For one, two-thirds of covering analysts rate the stock a "buy" or "strong buy." For another, ISIS Pharmaceuticals, Inc. has racked up a 50-day call/put volume ratio of 4.98 on the ISE, CBOE, and PHLX. Not only does this ratio indicate that roughly five ISIS calls have been bought to open for each put over the last couple months, but it also ranks higher than four-fifths of similar readings taken in the last 12 months.

  • Finally, Stifel boosted its price target on PEP by $1 to $108, and reaffirmed its "buy" rating. This isn't surprising, given the equity's 18.3% year-over-year gain to hover around $98.11. Accordingly, traders at the ISE, CBOE, and PHLX have bought to open more than six PepsiCo, Inc. calls for every put during the last two weeks. The resultant 10-day call/put volume ratio of 6.10 sits in the 96th percentile of its annual range. In other news, PEP added William R. Johnson to its board late last week to appease activist investor Nelson Peltz.

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Analyst Downgrades: FXCM Inc., eBay Inc., and Potash Corporation of Saskatchewan Inc.

Analysts downwardly revised their ratings on FXCM Inc (FXCM), eBay Inc (EBAY), and Potash Corp./Saskatchewan (USA) (POT)

by 1/20/2015 9:28 AM
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Analysts are weighing in today on forex issue FXCM Inc (NYSE:FXCM), online auctioneer eBay Inc (NASDAQ:EBAY), and fertilizer firm Potash Corp./Saskatchewan (USA) (NYSE:POT). Here's a quick roundup of today's bearish brokerage notes on FXCM, EBAY, and POT.

  • FXCM is set to resume trading today, after being halted last Friday in the wake of the Swiss National Bank fallout. However, it's not likely to be a good day for FXCM shareholders, with the stock down 90% in electronic trading as details emerge over its bailout package from Leucadia National Corp. (NYSE:LUK). Heading into today, the security was already staring at a 23.8% loss to trade at $12.63, but a number of brokerage firms are eyeing record-low territory for FXCM Inc. Specifically, KBW slashed its price target by $5.50 to $4.50, while Credit Suisse cut its target price to $3.75 from $4. In addition, J.P. Morgan Securities downgraded FXCM to "neutral" from "overweight." More bearish brokerage notes could be on the horizon, considering the equity's average 12-month price target of $17.65 stands at a steep 40% premium to last week's closing price.

  • Ahead of EBAY's fourth-quarter earnings report -- slated for release after tomorrow's close -- the stock received price-target cuts at Piper Jaffray (to $55) and Benchmark (to $64), with the brokerage firms underscoring their respective "neutral" and "buy" ratings. Since hitting its most recent high of $57.94 on Dec. 22, the security has been on the decline. Specifically, shares of EBAY are down 7.4% to $53.66, but appear to have found a foothold atop their 200-day moving average, currently located at $52.94. Meanwhile, on the sentiment front, EBAY's Schaeffer's put/call open interest ratio (SOIR) of 0.39 ranks in the 16th annual percentile, meaning short-term speculators are more call-heavy than usual toward eBay Inc.

  • POT is trading higher ahead of the bell, as solid guidance from sector peer Mosaic Co (NYSE:MOS) overshadows a price-target cut to $35 from $36 and reiterated "hold" rating from Canaccord Genuity. On the charts, Potash Corp./Saskatchewan (USA) has found a recent level of support at its 60-day moving average, and closed Friday just north of here at $35.09. Option traders, however, have been betting on a breach of this trendline -- which served as resistance in July through mid-November of last year. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), POT's 10-day put/call volume ratio of 1.05 ranks in the bearishly skewed 84th annual percentile.

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