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Options Check-Up: Nike Inc, QUALCOMM, Inc., and Nokia Corporation

Analyzing recent option activity on NKE, QCOM, and NOK

by 12/18/2014 7:58 AM
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Among the stocks attracting attention from options traders lately are athletic apparel giant Nike Inc (NYSE:NKE), networking specialist QUALCOMM, Inc. (NASDAQ:QCOM), and mobile phone maker Nokia Corporation (ADR) (NYSE:NOK). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on NKE, QCOM, and NOK.

  • NKE has performed well in 2014, gaining roughly 20% year-to-date to perch comfortably at $94.50. Surprisingly, sentiment in the options pits is slightly more bearish than usual. Nike Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.51 ranks higher than 57% of all other readings in the past year. However, NKE's 30-day at-the-money implied volatility hit a new high yesterday at 28.8% before settling at 27.8%, showing high demand -- and, thus, elevated prices -- for short-term options ahead of tonight's earnings report.

  • QCOM has tumbled 12.4% since peaking near $82 in mid-July, and despite yesterday's 2.7% gain, the stock has shed 2.7% of its value year-to-date to sit at $72.21. Accordingly, sentiment among options traders is growing increasingly bearish, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.87 ranks higher than 90% of readings in the past year. The equity's short-term options are currently more expensive than usual, as its Schaeffer's Volatility Index (SVI) of 25% ranks in the 73rd percentile of its yearly range. Meanwhile, analysts covering QUALCOMM, Inc. are overwhelmingly bullish, with 18 out of 23 giving the equity a "buy" or better rating, with not a single "sell" in sight. If the stock continues to fall, it may see a round of analyst downgrades, which could push the shares even lower.

  • Shares of NOK have underperformed lately, losing 3.1% year-to-date, despite gaining 1.7% yesterday to rest at $7.86. Correspondingly, traders in the options pits are slowly shifting from bullish to bearish on the stock. Nokia Corporation's (ADR) 50-day ISE/CBOE/PHLX put/call volume ratio of 0.29 is in the 75th percentile of its annual range, meaning puts have been bought to open over calls at a faster pace only 25% of the time in the last year. Per the equity's SVI of 38% -- which is in the 43rd annual percentile -- short-term options prices are relatively muted. However, the stock's Schaeffer's Volatility Scorecard (SVS) of 22 indicates the shares have tended to make undersized moves over the past year, relative to what the options market has priced in.


Herbalife Ltd. (HLF) Puts Hot After Ackman Takes Aim

Herbalife Ltd. hit a new low after Bill Ackman's video, triggering bearish options betting

by 12/17/2014 2:35 PM
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It's been a wild ride for Herbalife Ltd. (NYSE:HLF) today. After dropping 5% to a new annual low of $35.45, the shares have bounced back in spite of activist investor Bill Ackman's latest bearish presentation, in which he predicted the "pyramid scheme" will implode under the scrutiny of regulators. At last check, HLF has muscled 1.3% higher to $37.86, though bearish bets are gaining traction in the options pits.

Roughly 12,000 HLF puts have traded so far today -- about four times the number of calls exchanged, and representing a 30% mark-up to the stock's average intraday put volume. It looks like speculators are buying to open the deep in-the-money January 2016 70-strike put -- most active on the day -- while short-term bears are circling the December 35 put, which will move into the money if HLF retreats below $35 (and deeper into new-low territory) by Friday's close, when front-month options expire.

Today's affinity for pessimistic positions is par for the course for HLF. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 3.72 stands higher than 94% of all other readings from the past year. In other words, option buyers have picked up HLF puts over calls by a wider-than-usual margin during the past two weeks.

Daily Chart of HLF since January 2014

Technically speaking, Herbalife Ltd. (NYSE:HLF) has surrendered more than half its value in 2014, and has underperformed the broader S&P 500 Index (SPX) by more than 30 percentage points in the past two months. As such, it's no surprise that Ackman isn't the only one shorting HLF; short interest accounts for 38.2% of the equity's total available float, representing more than 12 sessions' worth of pent-up buying demand, at HLF's average daily trading volume.


Chevron Corporation (CVX) Traders Switch Sides Amid Rebound

Chevron Corporation calls are trading at two times the intraday average

by 12/17/2014 2:34 PM
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Chevron Corporation (NYSE:CVX) found a firm foothold atop the century mark this week, home to peak put open interest in the December series. Today -- thanks to a sector-wider rally in energy names -- the shares are up 3.6% at $105.36, making CVX the biggest gainer on the Dow. This strong bounce has done little to satiate options traders, though, who are scooping up calls at two times the intraday average.

Daily Chart of CVX Since November 2014

Most active by a mile is the stock's January 2015 110-strike call, where 11,216 contracts have been exchanged. It appears a number of positions have been bought to open -- a theory echoed by data from the International Securities Exchange (ISE) -- as traders bet on an extended run higher through January options expiration.

From a wider sentiment perspective, today's accelerated call activity marks a change of pace in CVX's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.98 ranks in the bearishly skewed 80th annual percentile. Should Chevron Corporation (NYSE:CVX) extend its rebound from support at the round-number $100 mark, a continued shift in sentiment among options traders could help fuel the security's fire.


Rite Aid Corporation (RAD) Bulls Bet On a Post-Earnings Breakout

Rite Aid Corporation has a history of post-earnings swoons

by 12/17/2014 1:18 PM
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Rite Aid Corporation (NYSE:RAD) is scheduled to unveil its fiscal third-quarter earnings report bright and early tomorrow morning. Over the past four quarters, the stock has averaged a single-session post-earnings loss of 6% -- including an 18.5% plunge in September. In spite of this, calls are trading at four times the average intraday rate today, with a number of option bulls betting on RAD to buck this historical trend.

Most active in RAD's options pits is the December 6 call, where 4,086 contracts have changed hands. Drilling down, it appears a number of these positions are being bought to open, as traders roll the dice on the stock to be perched above $6 at week's end, when the front-month options expire.

On the charts, Rite Aid Corporation (NYSE:RAD) -- unlike sector peer CVS Health Corp (NYSE:CVS) -- has struggled since hitting a 12-year high of $8.61 in early June, with the shares off more than 30% to trade at $5.99. What's more, the $6 level, which coincides with RAD's 320-day moving average, as well as peak call open interest in the December series, has put a quick halt to today's rally attempt.

Daily Chart of RAD Since June 2014 With 320-Day Moving Average


Trader Finds Creative Way to Bet Bearishly On First Solar, Inc. (FSLR)

One speculator initiated a synthetic short position on First Solar, Inc.

by 12/17/2014 10:23 AM
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Things have been pretty gloomy for First Solar, Inc. (NASDAQ:FSLR), which has lost nearly a quarter of its value this year to perch at $41.19. Yesterday, in fact, the shares dropped 1.8% and touched an annual low of $40.78, despite Morgan Stanley giving the company a 50% chance of launching a yield co, while maintaining an "equal weight" rating and issuing a new $47 price target. This flurry of developments brought options traders to the table, too, as contracts crossed at nearly triple the expected daily clip.

One of Tuesday's more interesting transactions involved the simultaneous initiation of a 2,000-contract long position at the January 2015 45-strike put and identically sized short position at the January 2015 45-strike call. In other words, this speculator implemented a synthetic short to gamble on additional downside in FSLR over the next five weeks.

A high degree of pessimism is detected throughout the options pits. During the last 10 days, FSLR puts have been bought to open at a faster rate than calls, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The resultant put/call volume ratio of 1.37 rests just 2 percentage points from an annual bearish extreme.

This morning, though, while First Solar, Inc. (NASDAQ:FSLR) earlier stumbled to a fresh low of $40.54, the shares were last seen up 0.7%. Helping the stock -- and the solar sector, more generally -- is news that the U.S. Commerce Department will impose a stiff tariff on solar equipment imported from China and Taiwan.

Daily Chart of FSLR Since January 2014


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