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Option Bull Looks for JetBlue Airways Corporation (JBLU) to Fly

JetBlue Airways Corporation options volume swells, powered by a bullish risk reversal

by 4/16/2014 3:04 PM
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Option Brief: JetBlue Airways Corporation (NASDAQ:JBLU) options are trading at breakneck speed this afternoon. More than 7,500 calls and 5,500 puts are on the tape -- roughly six and 23 times their respective intraday averages.

Attracting our attention is a bullish risk reversal, which Trade-Alert highlighted this morning. Specifically, a block of 5,000 May 8 puts traded at the bid price of $0.15 each, and within seconds, a matching lot of May 9 calls crossed the tape at the ask price of $0.25 apiece. Volume at both strikes outstrips open interest, and implied volatility is trending higher. This suggests a spread trader is making a bullish bet on JBLU by selling to open the puts, and simultaneously buying to open the calls.

Under the terms stated above, the trader expects JBLU to fly higher during the next four-plus weeks, and finish above the 9 strike by the close on Friday, May 16, when the soon-to-be front-month options expire. Gains will begin to accumulate past the breakeven point of $9.10 (call strike plus the net debit paid).

By contrast, the option bull is hoping JetBlue shares don't dip below $8, which would put him at risk of assignment -- with a maximum potential loss of $8.10 (short strike plus net debit), should the stock reach zero. Alternatively, both options could be rendered worthless if the shares are resting between $8 and $9 at expiration, in which case the trader would simply part with the $0.10 net debit he paid for each pair of contracts.

The equity is headed in the right direction so far, up 4.3% to $8.67 on an upgrade to "buy" from "hold" at Argus. Also important -- next Thursday morning is JetBlue Airways Corporation's (NASDAQ:JBLU) scheduled earnings date. The Street is projecting first-quarter earnings of 9 cents per share from the airline, or 4 cents higher than a year ago.


Most Active Options Update: Apple Inc. (AAPL)

April-dated options are popular on Apple today

by 4/16/2014 2:11 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 this afternoon is Apple Inc. (NASDAQ:AAPL).


Puts players have been active in Apple Inc.'s options pits of late, per data from three major exchanges. In fact, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.71 ranks in the 98th percentile of its annual range, meaning puts have been bought to open, relative to calls, with more rapidity just 2% of the time within the past year.

In today's session, puts are trading at a slight mark-up to the average intraday pace, with speculators paying particular attention to the April 515 strike. More than 16,000 contracts have changed hands thus far -- a healthy portion at the ask price, hinting at buyer-driven activity. Meanwhile, volume outstrips open interest, suggesting that at least a portion of the day's volume is a result of new positions being initiated. By purchasing the puts to open, the expectation is for AAPL to fall south of $515 by tomorrow's close -- when front-month options expire -- a level breached earlier today when AAPL tumbled to an intraday low of $514.14.

Also worth mentioning is the most active strike in AAPL's options pits today, which happens to fall on the call side. Specifically, 23,032 April 520 calls are on the tape -- more than doubling existing open interest here. Based on AAPL's current price of $518.46, this strike is seeing a mix of buying and selling activity, a theory confirmed by data from the ISE. For those buying to open the calls, the goal is for AAPL to rally north of $520 over the next session-plus, while those selling to open the calls are betting on this level to act as a short-term layer of resistance.

Elsewhere, a U.S district court yesterday ruled against Apple Inc.'s (NASDAQ:AAPL) e-book price-fixing appeal. Meanwhile, LiveDeal Inc (NASDAQ:LIVE) announced it has completed the development of its iOS app, and is now awaiting Apple's approval.


Option Clips: Twitter Inc, PepsiCo, Inc., and United Continental

Reviewing notable options activity on Twitter Inc, PepsiCo, Inc., and United Continental Holdings Inc

by 4/16/2014 12:32 PM
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Two stocks generating buzz on StockTwits today are microblogging pioneer Twitter Inc (NYSE:TWTR) and soft drink heavyweight PepsiCo, Inc. (NYSE:PEP). What's more, another name attracting unusual options attention is air carrier United Continental Holdings Inc (NYSE:UAL). Here's a look at how today's option traders have been placing their bets on these three names.

  • An upgrade to "neutral" from "underperform" at Sterne Agee isn't helping Twitter Inc (NYSE:TWTR) shake its negative bias, as the stock is off 2.3% today at $44.48 after enjoying its biggest single-session gain on record yesterday. (This is likely an unwelcome development for yesterday's aggressive bullish speculators.) Meanwhile, total Twitter option volume is slightly elevated, running at a 40% mark-up to average intraday levels. With April options set to expire at tomorrow's close, it appears as though some speculators are closing out of their short-lived positions. The 10 most active TWTR strikes today expire tomorrow, implied volatility (IV) is dropping at these strikes, and open interest trumps volume, suggesting that positions are being purchased and sold to close across a host of strikes.

  • Ahead of its earnings report tomorrow morning, PepsiCo, Inc. (NYSE:PEP) is up 1.2% at $84.94. What's more, PEP is also under the microscope as a possible interested party for a large stake of SodaStream International Ltd (NASDAQ:SODA). In the options pits, call volume is running at three times the usual pace, with notable attention at the April 85 call. Given that IV has surged at this strike, and a healthy portion of the volume has traded at the ask price, it is possible these are eleventh-hour bets on a post-earnings pop. PepsiCo has managed to top analysts' per-share estimates in each of the past eight quarters, but has averaged a post-earnings gain of just 0.6% in the subsequent session.

  • Finally, call players have descended upon United Continental Holdings Inc (NYSE:UAL), bringing call volume to nearly triple what's typically seen on an intraday basis. Accounting for more than half of this action is a 10,000-contract block at the September 52.50 strike. Volume exceeds open interest, and the block went off closer to the bid price, suggesting the out-of-the-money calls may have been sold to open. By placing this trade, the call seller presumes that UAL will stay beneath $52.50 through September options expiration. In its eight-plus-year history, UAL has never traded north of this level.


Call Sellers Rush to Eldorado Gold Corp (USA) (EGO)

Eldorado Gold Corp's (USA) options activity centers on the October 7 call

by 4/16/2014 12:31 PM
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Option Brief: Eldorado Gold Corp (USA) (NYSE:EGO) call volume is exploding today. So far, more than 18,000 contracts are on the tape -- a 13-fold mark-up to the typical intraday pace. For comparison, fewer than 600 puts have been exchanged.

The vast majority of EGO's call volume has taken place at the October 7 strike, where 18,178 contracts have changed hands. Two-thirds of the activity transpired at the bid price, and volume dwarfs open interest at the strike, indicating the contracts were sold to open on the gold miner.

Long story short, the call writers anticipate EGO will finish south of the 7 strike at October options expiration -- in which case, the contracts will be rendered worthless, and the traders will retain the initial premium collected. On the other hand, if the stock advances beyond the strike, the sellers may be assigned, and on the hook to deliver the shares for $7 apiece, no matter how much they're worth. Right now, delta on the contracts sits at 0.27, indicating a slim 27% chance that they will expire in the money.

On the technical front, Eldorado Gold Corp (USA) (NYSE:EGO) has added to its double-digit year-over-year deficit today, shedding 1.2% to trade at $5.73. Fundamentally speaking, the company is scheduled to report first-quarter earnings after the close on Thursday, May 1. EGO has not fared well under the spotlight, falling shy of analysts' consensus bottom-line estimates in six of the past eight quarters, for an average loss of 1.7% in the subsequent week.


Las Vegas Sands Corp. (LVS) Option Traders Eye Extended Losses

Las Vegas Sands Corp.'s April 74 put is being bought-to-open today

by 4/16/2014 11:25 AM
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Option Brief: After hitting a six-year high of $88.28 in early March, Las Vegas Sands Corp. (NYSE:LVS) entered a period of consolidation, shedding roughly 15% in that time to churn near $74.91. In today's session, although the stock is enjoying a boost from the broader-equities market, it is staring up at its 32-week moving average -- a previous layer of support that could now be switching roles to act as resistance. In the stock's options pits, meanwhile, puts are trading at more than two times the average intraday pace, as traders gamble on LVS to resume its recent downtrend in the very near term.

At last check, the majority of the day's put volume had centered on LVS' April 74 strike, where 4,572 contracts have traded thus far. The vast majority of these puts have crossed at the ask price, implied volatility is up 1.6 percentage points, and volume easily outstrips open interest, collectively inferring buy-to-open activity. Delta for the put is docked at negative 0.36, suggesting a 36% chance the put will be in the money at tomorrow's close, when front-month options expire.

Although LVS tagged an intraday low of $73.98 this morning, risk for today's put buyers is limited to the initial premium paid, should LVS fail to breach the $74 mark again by tomorrow's close. According to Trade-Alert, the volume-weighted average price for the puts is $0.62.

Looking ahead, Las Vegas Sands Corp. (NYSE:LVS) is slated to tell all in the earnings confessional after next Thursday's close. The casino concern has fallen short of analysts' estimates in five of the past eight quarters, averaging a loss of 0.4% the following week. For LVS' first quarter, the consensus forecast is for a profit of 93 cents per share -- a roughly 31% improvement over the company's year-ago results.


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