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Lululemon Athletica inc. Halo Lift Sparks a Rush of Option Activity

Lululemon Athletica inc. calls and puts are trading at accelerated levels today

by 7/24/2014 2:41 PM
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Lululemon Athletica inc. (NASDAQ:LULU) is getting a halo lift today from sector peer Under Armour Inc (NYSE:UA), with shares of LULU up 4.8% at last check to trade at $39.37. In the stock's options pits, overall volume is trading at more than two times the average intraday pace, and all 10 of the most active contracts expire within the next two months. Against this accelerated demand for short-term options, LULU's 30-day at-the-money implied volatility (IV) has jumped 3.8% to 34.1%.

On the call side, the August 40 and 45 strikes have seen the most action. Diving deeper reveals that two symmetrical blocks totaling 2,600 contracts changed hands at the same time, suggesting the action was related. However, with IV lower at each leg, and open interest sufficient to cover volume, it's entirely possible this trader is closing out a previously initiated call spread on LULU.

Meanwhile, on the put side, the stock's September 37.50 strike is the most active. More than 1,700 contracts have changed hands here at a volume-weighted average price (VWAP) of $2.17. The majority traded at the ask price and IV is higher, pointing to the purchase of new positions. At-expiration breakeven at the close on Friday, Sept. 19 -- a time frame that encompasses LULU's quarterly earnings report -- is $35.33 (strike less VWAP). Gains will accumulate on a move down to zero, while losses are limited to 100% of the premium paid, should the equity finish north of the strike at expiration.

Speaking of earnings, Lululemon Athletica inc. (NASDAQ:LULU) is slated to step into the earnings confessional on Thursday, Sept. 11. The stock's post-earnings price action over the past eight quarters tends to side with the bears, as LULU has averaged a loss of 2.9% in the session subsequent to its report -- including a nearly 18% slide last June. For the yoga apparel maker's second quarter, Wall Street is calling for a per-share profit of 29 cents -- a dime less than what the company banked one year ago.


How Bulls Are Betting as Kandi Technologies Group Inc Crashes

Short-term options traders expect record highs from Kandi Technologies Group Inc

by 7/24/2014 2:38 PM
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Kandi Technologies Group Inc (NASDAQ:KNDI) is taking a beating this afternoon, after a law firm opened an investigation into how the carmaker has achieved its sales growth. Specifically, at last check, the shares were off 6.5% to trade at $17.09. Earlier, the stock found a place on the short-sale restricted (SSR) list, and options traders have been aggressive, with total volume nearly doubling the intraday average.

KNDI's most active strike is the deep out-of-the-money August 25 call, where nearly 1,200 contracts are on the tape. It appears the majority of these calls are being bought to open at a volume-weighted average price (VWAP) of $0.26, as speculators expect a strong rebound for the shares. In short, the traders believe KNDI will be sitting atop $25.26 (strike plus VWAP) at the close on Friday, Aug. 15, when the front-month contracts expire. This represents uncharted territory for the stock, despite the fact that it's more than tripled in value over the last year.

Profit potential is theoretically unlimited beyond the aforementioned breakeven mark. Conversely, the most the call buyers can lose is the initial premium paid, should Kandi Technologies Group Inc (NASDAQ:KNDI) be sitting below the strike at options expiration.


Most Active Options Update: J C Penney Company Inc (JCP)

Front-month call buyers expect J C Penney Company Inc to rally over the next month

by 7/24/2014 1:49 PM
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The 20 stocks listed in the table below are the S&P 400 MidCap Index (MID) components that have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is J C Penney Company Inc (NYSE:JCP), as traders target the retailer's short-term call options.

Most Active Options Table - MID

With call volume on J C Penney Company Inc totaling about 13,000 contracts this afternoon -- slightly outpacing the stock's daily average -- the most active strike is the August 9 call. So far, more than 3,900 contracts have changed hands at this front-month strike, with 77% trading on the ask side. Data from the International Securities Exchange (ISE) confirms today's speculative players are buying to open new bullish bets on JCP at this strike.

JCP is up 2.7% to trade at $9.01 this afternoon, which means those August 9 calls are right at the money. Based on today's volume-weighted average price (VWAP) of $0.46, call buyers will be able to collect a profit at expiration if JCP is trading above $9.46 (strike price plus VWAP). That would necessitate a rally of about 5% from current levels.

With the stock down nearly 45% year-over-year, bullish speculation is somewhat rare for J C Penney Company Inc (NYSE:JCP). Short interest accounts for almost 29% of the stock's float, and only 16% of analysts tracking the stock have deemed it worthy of a "buy" rating.


Options Radar: Angie's List, Citrix Systems, and Under Armour

Reviewing notable options activity on Angie's List Inc, Citrix Systems, Inc., and Under Armour Inc

by 7/24/2014 12:26 PM
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Three stocks seeing notable options activity today are business review site Angie's List Inc (NASDAQ:ANGI), cloud computing issue Citrix Systems, Inc. (NASDAQ:CTXS), and athletic apparel designer Under Armour Inc (NYSE:UA). Here's a look at how today's options traders have been placing their bets on these three names.

  • Angie's List Inc (NASDAQ:ANGI) has plummeted 21.5% to trade at $7.98 -- and earlier touched a record low of $7.77 -- after last night reporting a wider-than-expected second-quarter loss and issuing disappointing current-quarter revenue guidance. As a result, the stock was slammed by analysts on the Street, and landed on the short-sale restricted (SSR) list out of the gate. Meanwhile, bearish bettors are flocking to ANGI's options pits -- where put volume is running at 15 times the intraday average -- and buying to open the August 7.50 put.

  • On the flip side, Citrix Systems, Inc. (NASDAQ:CTXS) has rallied 4.2% to hover near $66.78, following a successful trip to the earnings confessional last night, and subsequent price-target hikes at no fewer than eight brokerage firms. On the options front, volume has accelerated to seven times the normal intraday clip, while CTXS' 30-day at-the-money implied volatility has fallen 36.7% to an annual low of 19.8% -- not shocking, given the post-earnings context. Traders are targeting the equity's September 67.50 call. The vast majority of the nearly 3,400 contracts on the tape here have crossed at the bid price, and volume is outstripping open interest, pointing to the initiation of new positions.

  • Lastly, Under Armour Inc (NYSE:UA) earlier rallied to a record high of $70.25, and is still sitting with a 15.5% advantage at $70.00, after the company earlier reported a second-quarter earnings beat and raised its full-year guidance. What's more, the stock was met with a trio of price-target hikes at Credit Suisse, Jefferies, and J.P. Morgan Securities. Elsewhere, options trading is sizzling, with overall volume registering at six times the intraday norm. UA's most active option is the weekly 7/25 70-strike call, where a healthy amount of contracts have been exchanged at the ask price, signaling buyer-driven activity.


Most Active Options Update: Pfizer Inc. (PFE)

Pfizer Inc. option bulls may be eyeing next week's earnings report

by 7/24/2014 12:02 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest around midday is Pfizer Inc. (NYSE:PFE), with traders picking up front-month calls on the pharmaceutical giant.

Most Active Options Table

Calls are the options of choice on Pfizer Inc. today, with roughly 10,000 calls and 3,500 puts changing hands so far. The most active strike is PFE's August 31 call, where 3,353 contracts have traded. Most of these near-the-money options changed hands at the ask price -- including a sweep of 1,096 -- and data from the International Securities Exchange (ISE) suggests these short-term bets are being bought to open.

By purchasing these front-month calls on PFE, the traders are betting on the Dow component to rally above $31 over the next several weeks. Based on the option's volume-weighted average price (VWAP) of $0.21, breakeven on today's purchased August 31 calls will be $31.21 (strike price plus VWAP) at expiration. To put that bullish forecast in perspective, PFE is fractionally higher at last check to trade at $30.42.

Today's call buyers might be looking ahead to next Tuesday, when Pfizer Inc. (NYSE:PFE) is scheduled to reveal its second-quarter earnings ahead of the bell. Unfortunately, the stock's post-earnings history doesn't always favor the bulls. PFE has matched or exceeded Wall Street's profit estimates in seven of the last eight quarters, but the stock is down 0.9%, on average, one week after earnings.


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