Stocks quoted in this article:
Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB), Netflix, Inc. (NASDAQ:NFLX), and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX). Here is a quick look at today's interesting activity in these options pits.
Amid rumors of an impending bidding war with Google Inc (NASDAQ:GOOG), Facebook Inc (NASDAQ:FB) is down 3.1% today at $24.28. The stock is due for a quick and hefty rebound, according to the group of option players who have picked up the July 30 call for a volume-weighted average price (VWAP) of $0.10. Greater than 80% of the 20,978 contracts traded have gone off at the ask price, implied volatility is 2.9 percentage points higher, and data from the International Securities Exchange (ISE) confirms that a number of positions have been bought to open. In order for these deep out-of-the-money (OOM) calls to be profitable, FB must muscle above the $30.10 level (strike plus VWAP) by the close on July 19. Not only does this breakeven mark represent expected upside of 24% from the equity's current perch, but also territory not charted since early February. From a contrarian perspective, the stock could encounter some headwinds in the near term. No fewer than 19 out of 30 analysts maintain a "buy" or "strong buy" recommendation toward the stock, with not a single "sell" around, while the consensus 12-month price target of $33.21 runs at a 36.8% premium to present trading levels. Should FB continue to turn in a woeful technical performance, a round of downgrades and/or price-target cuts could pressure the shares lower.
A modest rise for Netflix, Inc. (NASDAQ:NFLX) in today's session has option traders eyeing additional gains in the near term. Almost 2,000 weekly 5/31 225-strike calls have crossed the tape, mostly at the ask price. Implied volatility is on the rise, and volume is outstripping open interest, implying that a fresh batch of bullish bets is being initiated. With NFLX lingering near $226.71, the calls are currently in the money. However, in order to be profitable, the stock must land above $230.42 (strike plus the VWAP of $5.42) by next Friday's close. From wider sentiment standpoint, puts have been in favor among short-term speculators. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.19 ranks in the 81st percentile of its annual range, indicating a put-skewed bias in the front three-months' series of options. However, as my colleague Andrea Kramer noted last week, not all of the put activity has been bearish in nature.
Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has been in a steady decline since hitting a mid-September annual high of $43.65, with the shares off almost 31% to trade at $30.25. Some speculators in today's session see a longer-term struggle for the mining magnate, and are picking up the January 2014 27-strike put for a VWAP of $2.07. Of the 1,308 contracts traded, 96% have gone off at the ask price, and volume is exceeding current levels of open interest, hinting at buy-to-open activity. By purchasing the OOM puts, traders will begin to profit with each step south of $24.93 (strike minus the VWAP) over the following eight months. Delta for the LEAPS is docked at negative 0.33, or 33%, indicating the position has a 1-in-3 shot of landing in the money ahead of January options expiration. In the near term, the stock could continue to struggle thanks to heavy accumulations of call open interest at the overhead June 31 strike. This layer could translate into options-related resistance as the nearly 16,100 contracts that reside here begin to unwind over the next several weeks.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.