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Xilinx, Inc. (XLNX) Traders Eye a Long-Term Recovery

Options traders think the worst is over for Xilinx, Inc.

by 8/1/2014 2:45 PM
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Xilinx, Inc. (NASDAQ:XLNX) calls are trading at triple the usual intraday rate this afternoon. By the numbers, about 14,000 calls are on the tape, versus just over 3,000 puts. Against this backdrop, the tech stock's 30-day at-the-money implied volatility has shot 7.6% higher to 22.4%, signaling increased demand for short-term options.

However, the most active strike is the March 41 call, which doesn't expire for another seven-plus months. Nearly 6,000 contracts have changed hands here -- the majority at the ask price, suggesting they were bought. More specifically, with just 142 contracts in open interest at the strike, it's safe to assume bullish bets are being freshly minted -- although a portion of the positions may have been rolled down and out from the January 2015 46-strike call.

By purchasing the in-the-money calls at a volume-weighted average price (VWAP) of $3.14, the speculators are gambling that XLNX will rally past breakeven at $44.14 (strike plus VWAP) by March options expiration. Gains are theoretically unlimited north of here, while the maximum risk on the trade is the initial premium paid, should the shares backpedal and finish below the strike at expiration.

On the charts, Xilinx, Inc. (NASDAQ:XLNX) is 0.6% higher this afternoon to wink at the $41.38 level. However, the stock's year-to-date deficit is still close to 10%, following last week's massive bear gap, which took place after the company's disappointing turn in the earnings confessional prompted a round of price-target cuts.


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Most Active Options Update: Twitter Inc (TWTR)

One Twitter Inc options trader may be upping the bullish ante

by 8/1/2014 2:23 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 today is Twitter Inc (NYSE:TWTR), which has seen accelerated call volume in spite of today's pullback.

Most Active Options Table

Twitter Inc -- which is apparently testing a new, more organized hashtag format -- was last seen 1.4% lower at $44.56, retreating from Wednesday's four-month post-earnings high of $48. Despite the dip, option players are apparently gambling on an extended rally for TWTR, with call volume running at a 45% mark-up to the average intraday rate.

Attracting notable attention has been the January 2015 45-strike call, which has seen volume surpass open interest, hinting at fresh initiations. In fact, nearly all of the calls traded in one fell swoop, with a block of 7,447 contracts exchanged near the ask price at $5.80. In other words, it appears the calls were bought to open.

At the same time, a large block of January 2015 40-strike calls traded, but closer to the bid price at $8.35, suggesting they were sold. Against this backdrop, it looks like one speculator may be upping the bullish ante on TWTR.

Specifically, the trader may have rolled her bullish bets higher. She sold to close the now in-the-money January 2015 40-strike calls, and used the proceeds to buy even more calls at the 45-strike. As such, she's expecting Twitter Inc (NYSE:TWTR) shares to climb atop $45 through the next few months. Risk is limited to the initial net debit, should the stock finish south of $45 on Jan. 16, 2015, when the options expire. Reward, meanwhile, is theoretically unlimited to the upside.


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Bristol-Myers Squibb Co (BMY) Bear Attacks Amid Buyout Buzz

Potential underfoot support didn't deter this Bristol-Myers Squibb Co put buyer

by 8/1/2014 2:05 PM
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Rumors are swirling about a possible Bristol-Myers Squibb Co (NYSE:BMY) takeover of Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). While the buzz has traders targeting ACHN calls, puts are being exchanged at five times the normal intraday pace in BMY's options pits. Against this backdrop, the stock's 30-day at-the-money implied volatility has risen 3% to 19%, suggesting elevated demand for short-term contracts.

Diving into the details, however, BMY's most active strike is the longer-term December 45 put, where nearly 9,000 contracts are on the tape. Roughly two-thirds of this volume crossed as a block when -- according to the International Securities Exchange (ISE) -- a trader bought to open 6,202 contracts in one fell swoop, at an ask price of $1.17 apiece. In so doing, this individual laid out a total of $725,634 (premium paid * number of contracts * 100 shares per contract) for his bearish bet.

On the one hand, the put buyer will profit at expiration if BMY is lodged below $43.83 -- or the strike less the premium paid -- with additional profits accruing on a move all the way to zero. On the other, the most he will lose is the initial cash outlay, should the equity finish at or above the strike at the close on Friday, Dec. 19, when the contracts expire.

On the charts today, Bristol-Myers Squibb Co (NYSE:BMY) is following the broad-market trend lower, off 1.2% at $50.02. Regardless, since hitting a year-to-date low of $46.30 in early June, the shares have tacked on 8%. What's more, peak levels of front-month put open interest are located at the August 50 strike, which may increase the chance that the shares may find a short-term level of support at the half-century mark.


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Call Volume Picks Up as The Procter & Gamble Company (PG) Soars

A bottom-line beat has The Procter & Gamble Company outperforming today

by 8/1/2014 1:49 PM
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The Procter & Gamble Company (NYSE:PG) is bucking the broad-market trend lower today, thanks this morning's second-quarter profit win and news of an impending brand overhaul. In fact, the stock is easily outperforming its fellow Dow components, up 3.5% to trade at $80.04. Option traders are responding in kind, scooping up calls at a rate almost five times the intraday average. Meanwhile, in the wake of this morning's scheduled announcement, the security's 30-day at-the-money implied volatility has plunged 11.6% to 12.4% -- in the low 30th percentile of its annual range.

The most active PG option this afternoon is the August 81 call, and it appears a number of speculators are eyeing more upside for the blue chip over the next two weeks. The majority of the 6,588 contracts traded here have done so at the ask price, and volume handily outstrips open interest -- two signs of buy-to-open activity.

The volume-weighted average price (VWAP) for the calls is $0.50, making breakeven at the close on Friday, Aug. 15 -- when front-month options expire -- $81.50 (strike plus VWAP). Gains are theoretically unlimited beyond this point, while losses are capped at the premium paid, should The Procter & Gamble Company (NYSE:PG) finish south of the strike at expiration. Thanks to today's earnings-induced pop, delta on the call has jumped to 0.32 from 0.083 at last night's close.


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Options Radar: Scientific Games Corp, Tableau Software, and Achillion

Reviewing notable options activity for Scientific Games Corp, Tableau Software Inc, and Achillion Pharmaceuticals, Inc.

by 8/1/2014 12:32 PM
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Three stocks seeing notable options activity today are slot machine maker Scientific Games Corp (NASDAQ:SGMS), tech concern Tableau Software Inc (NYSE:DATA), and biopharmaceutical firm Achillion Pharmaceuticals, Inc. (NASDAQ:ACHN). Here's a look at how today's options traders have been placing their bets on SGMS, DATA, and ACHN.

  • SGMS is up 4.3% to trade at $8.92 in the wake of some acquisition news, and speculators are flooding the equity's options pits. At last check, overall volume was trading at 38 times the average intraday rate, and per the stock's 30-day at-the-money (ATM) implied volatility (IV) -- which is at a new annual high of 90.1% -- short-term options are in demand. Drilling down, new positions are being initiated at Scientific Games Corp's front-month August 7.50 and 12.50 puts.

  • DATA, meanwhile, is down 6% to $61.11, despite last night's stronger-than-expected second-quarter earnings results being met with no fewer than four price-target hikes and one upgrade. On the heels of this scheduled announcement, the stock's 30-day ATM IV has plunged 13.3% to 52.3% -- in the middling 58th percentile of its annual range. Option traders are betting on more downside over the next two weeks, with buy-to-open activity detected at Tableau Software Inc's August 59 put.

  • ACHN is tentatively scheduled to report earnings next week, and ahead of the event, option traders are piling up on calls. Today, call volume is running at six times what's typically seen at this point in the day, and amid this accelerated demand, the stock's 30-day ATM IV has soared 26.6% to 126.3% -- in the 95th annual percentile. Traders are buying to open the equity's August 8 calls for a volume-weighted average price (VWAP) of $0.43, making at-expiration breakeven $8.43 (strike plus VWAP). Profit will accumulate north of here, while losses are capped at 100% of the premium paid, should the equity settle south of the strike at the close on Friday, Aug. 15, when front-month options expire. On the charts, Achillion Pharmaceuticals, Inc. is up 1% this afternoon to linger near $6.92. Longer-term, the shares have more than doubled in 2014.

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