Speculative players are taking sides on GPS maker Garmin Ltd. (NASDAQ:GRMN), as well as tech concerns NetApp Inc. (NASDAQ:NTAP) and ARM Holdings plc (ADR) (NASDAQ:ARMH), according to data from the major options exchanges. Traders are buying to open calls on GRMN and NTAP, and are purchasing ARMH puts at a rapid-fire rate. Here's a closer look at recent option activity on these three securities.
Garmin Ltd. (NASDAQ:GRMN)
During the past five days, options traders on the International Securities Exchange (ISE) have bought to open 5,372 calls on GRMN, compared to fewer than 60 puts -- resulting in a call/put volume ratio of 101.36.
Broadening that to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) (and expanding the scope to two weeks), GRMN has racked up a 10-day call/put volume ratio of 3.68. This ratio stands just 8 percentage points from a 12-month peak, confirming that option buyers are picking up GRMN calls over puts at a much faster-than-usual clip.
As such, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.22 sits in the 28th percentile of its annual range. In other words, near-term option traders are more call-skewed than usual right now.
However, it's worth noting that short interest accounts for 9.8% of GRMN's total available float, representing more than 14 sessions' worth of pent-up buying demand, at the stock's average pace of trading. Against this backdrop, it's possible that the growing appetite for long calls -- especially of the out-of-the-money variety -- could be attributable to short sellers hedging their bearish bets.
On the charts, it's no wonder Garmin Ltd. (NASDAQ:GRMN) shorts might be getting nervous. The stock has advanced about 30.7% since touching an annual low of $32.52 in April. Now, the shares are knocking on the door of familiar resistance in the $42.50 neighborhood, which has stifled GRMN's upward momentum on several occasions since mid-2012.
Should GRMN extend its journey higher, a short-squeeze situation could add contrarian fuel to the equity's fire. What's more, a round of upgrades could also lure additional buyers. Currently, six out of 10 analysts maintain "hold" or worse opinions on the stock.
NetApp Inc. (NASDAQ:NTAP)
Turning to another uptrending equity, NTAP has also been a popular target among option bulls. During the past five sessions, traders on the ISE have bought to open nearly 5,800 calls and just 119 puts, resulting in a call/put volume ratio of 48.65. Echoing that, the stock sports a 10-day ISE/CBOE/PHLX call/put volume ratio of 3.14, indicating that speculators have purchased more than three NTAP calls for every put during the past two weeks.
Garnering notable attention have been the October 41 and 42 calls, which have seen about 6,500 and 5,200 contracts added, respectively, during the past 10 sessions. More recently, the out-of-the-money September 44 call saw more than 1,800 contracts added just yesterday. Most of the calls crossed on the ask side, hinting at buy-to-open activity.
While short interest dropped 33.8% during the past month, these bearish bets still represent about four sessions' worth of pent-up buying demand, at NTAP's average pace of trading. As such, yesterday's out-of-the-money calls could've been purchased as protection by the shorts.
Whatever the motive, now is an opportune time to gamble with NTAP's short-term options. The equity's Schaeffer's Volatility Index (SVI) of 22% rests just 8 percentage points from a 12-month low, implying that near-term option premiums are relatively inexpensive at the moment.
Technically speaking, NTAP -- currently flirting with $41.97 -- has outperformed the broader S&P 500 Index (SPX) by 8.5 percentage points during the past two months, and touched a new annual high of $43.13 just last month. Nevertheless, just 12 out of 28 analysts consider the stock worthy of a "buy" or better rating. Should the bears change their tune, a wave of upbeat analyst attention could bolster NetApp Inc. (NASDAQ:NTAP) even higher.
ARM Holdings plc (ADR) (NASDAQ:ARMH)
Finally, ARMH has been range-bound over the past couple of months, stagnating between support near $39 and resistance in the $42 area -- home to the stock's 32-week moving average. The shares were last seen in the upper end of this range, at $41.83. Against this backdrop, ARMH has seen nearly 1,100 puts change hands on the CBOE during the past five sessions, compared to fewer than 300 calls -- resulting in a put/call volume ratio of 3.80.
The appetite for ARMH puts is nothing new, though. Over the past 50 sessions on the ISE, CBOE, and PHLX, the stock has racked up a put/call volume ratio of 3.04. This ratio sits in the 92nd percentile of its annual range, suggesting option buyers have picked up ARMH puts over calls at a near-annual-high clip during the past 10 weeks.
In the same vein, the security's SOIR of 2.02 indicates that puts more than double calls among options expiring within three months. This ratio is higher than 82% of all other readings of the past year, implying that short-term traders are more put-biased than usual.
Garnering noteworthy attention have been the out-of-the-money September 37 and 39 puts, which have seen roughly 1,200 contracts added apiece during the past two weeks. Considering ARMH has struggled on the charts of late, it's possible that shareholders are buying the out-of-the-money puts to guard against a breakout to the downside. By purchasing the puts to open, the traders can lock in an acceptable price at which to sell their ARMH shares, should the security breach the strikes within the options' lifetime.
Short sellers, on the other hand, have more straightforward bearish motives. Short interest skyrocketed 54.5% during the past two reporting periods. At ARM Holdings plc's (ADR) (NASDAQ:ARMH) average daily trading volume, it would take more than a week to repurchase all of these pessimistic positions.
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