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Options Radar: SodaStream International Ltd, DryShips, and NetSuite

Reviewing notable options activity on SodaStream International Ltd, DryShips Inc., and NetSuite Inc

by 10/24/2014 1:28 PM
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Three stocks seeing notable options activity today are at-home beverage maker SodaStream International Ltd (NASDAQ:SODA), shipping issue DryShips Inc. (NASDAQ:DRYS), and cloud concern NetSuite Inc (NYSE:N). Here's a look at how speculators are placing their bets on SODA, DRYS, and N.

  • After spending most of the morning churning around breakeven, SodaStream International Ltd (NASDAQ:SODA) took off shortly before lunchtime, and was last seen 15.9% higher at $24.55, following reports of a partnership with PepsiCo, Inc. (NYSE:PEP). Against this backdrop, call players are once again flooding SODA's options pits, with volume running at 10 times the average intraday pace, and based on the equity's 30-day at-the-money (ATM) implied volatility (IV) -- which is up 18% to 74.5% -- short-term contracts are in high demand. Drilling down, buy-to-open activity has been detected at SODA's November 25 call, as traders gamble on an extended rise over the next four weeks -- a time frame that encompasses the company's third-quarter earnings report, slated for release ahead of next Wednesday's open.

  • Having a decidedly different day is DryShips Inc. (NASDAQ:DRYS), which has plunged 22% to churn near $1.57 -- music to the ears of option bears -- after the company priced its new share offering at a 30% discount to last night's closing price of $2.00. Today's bearish gap -- which landed the stock on the short-sale restricted (SSR) list -- only highlights DRYS' longer-term technical troubles, with the shares down 45% year-over-year. However, during that time, the stock has never traded below the $1 mark, which may be why one speculator today bet big on this level to hold as a floor over the next 15 months. Specifically, a massive block of 19,360 January 2016 1-strike puts was sold to open earlier for $0.20 apiece, resulting in an initial credit of $387,200 (number of contracts * premium collected * 100 shares per contract). This also represents the maximum reward on the play, should DRYS maintain its foothold atop the dollar mark through January 2016 options expiration.

  • NetSuite Inc (NYSE:N), meanwhile, has rallied 12.4% to $104.45 -- and moved back into the black on a year-to-date basis -- after offering up a better-than-expected quarterly earnings report and an upbeat outlook for the current quarter. What's more, the stock received no fewer than nine price-target hikes in the wake of its results, including one from Credit Suisse to $125 from $115, with the brokerage firm underscoring its "outperform" rating. On the options front, overall volume has soared to seven times what's typically seen at this point in the day, and following last night's scheduled event, the equity's 30-day ATM IV has plunged 23.8% to 33.4%. New positions are being initiated at the stock's November 115 call and November 90 put, but it appears both may be seeing sell-to-open activity.


Most Active Weekly Options: Ford Motor Company (F)

Short-term option bulls are targeting reeling Ford Motor Company

by 10/24/2014 10:49 AM
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The 20 stocks listed in the table below are the S&P 500 Index (SPX) components that have attracted the highest weekly 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 Ford Motor Company (NYSE:F), where options traders are eyeing the $14 level.

Most Active Weekly Options Table

Ford Motor Company is off 3% this morning at $13.97, following its third-quarter earnings report. While the company posted an earnings beat, poor results in Europe and Russia -- as well as costs associated with transitioning its F-150 pickup to aluminum from steel -- are weighing on the shares.

Nevertheless, options traders are taking an upbeat approach to F, with calls crossing at a 46% mark-up to the average intraday rate, and outnumbering puts by a nearly 4-to-1 margin. What's more, the stock's 30-day at-the-money implied volatility has edged 1.3% higher to 27.9%, signaling elevated demand for short-term strikes.

Looking more closely, F's two most action options are the weekly 10/31 and 11/14 14-strike calls, where more than 7,000 total contracts have been exchanged. The majority have traded at the ask price, and volume outstrips open interest, pointing to buy-to-open activity. In other words, these speculators anticipate Ford Motor Company (NYSE:F) will muscle back atop $14 by the respective expiration dates.


Bulls Bet On Arrowhead Research Corp (ARWR) to Shoot Higher

Arrowhead Research Corp has been churning around $7 over the past two weeks

by 10/24/2014 9:59 AM
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Biopharmaceutical firm Arrowhead Research Corp (NASDAQ:ARWR) has struggled on the charts lately, exacerbated by a roughly 44% plunge on Oct. 8, due to poorly received mid-stage trial results of the company's hepatitis B treatment. Since then, the shares have largely churned around $7, closing last night at $6.92. However, one group of traders yesterday wagered on short-term upside for the stock.

Diving right in, calls were exchanged at a 26% mark-up to typical daily levels on Thursday. Also, ARWR's 30-day at-the-money implied volatility rose 8.6% to 132.7%, hinting at elevated demand for short-term strikes. In fact, eight of the security's 10 most active options belong to the front-month November series.

Leading the way was ARWR's November 9 call, where 2,227 contracts changed hands. Almost all traded at the ask price, and open interest jumped overnight, suggesting bullish bets were freshly initiated. In other words, these option players believe ARWR will topple $9 by the close on Friday, Nov. 21, when front-month options expire. Of course, it's possible some of these buyers are short sellers attempting to hedge, considering 27.4% of the stock's float is sold short.

On the fundamental front, the call's lifetime encompasses Arrowhead Research Corp's (NASDAQ:ARWR) fiscal fourth-quarter earnings report, due out between Tuesday, Nov. 10, and Friday, Nov. 14. The Street is expecting a per-share loss of 24 cents from the biopharmaceutical company.


King Digital Entertainment PLC (KING) Call Volume Spikes

Some King Digital Entertainment PLC call buyers may be short sellers in disguise

by 10/23/2014 2:40 PM
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King Digital Entertainment PLC (NYSE:KING) is up 2% this afternoon at $11.50, but remains a long way from its March IPO price of $20.50. Nevertheless, the positive price action is luring options traders to the table -- especially on the call side, where volume is running at nearly quadruple the expected intraday rate.

Digging deeper, the two most active strikes are the November 12.54 and 11.54 calls, where 1,911 and 629 contracts have traded, respectively -- mostly at the ask price, suggesting buyer-driven volume. Opening activity is a possibility at the higher-strike call, according to Trade-Alert -- which speculates short sellers may be initiating the positions to act as hedges, ahead of KING's upcoming earnings report, the night of Thursday, Nov. 6. Meanwhile, buy-to-open action is more clear-cut at the lower-strike call, as volume outstrips open interest.

As alluded to, King Digital Entertainment PLC (NYSE:KING) -- maker of "Candy Crush Saga," and as of yesterday on Facebook Inc (NASDAQ:FB), "Candy Crush Soda Saga" -- has been a technical disaster since publicly debuting. In fact, the shares have underperformed the broader S&P 500 Index (SPX) by 40 percentage points during the past three months. It's no wonder, therefore, that one-quarter of KING's total float is sold short.


Most Active Weekly Options: Microsoft Corporation (MSFT)

Option skeptics disregard Microsoft Corporation's historical post-earnings price action

by 10/23/2014 1:40 PM
Stocks quoted in this article:

The 20 stocks listed in the table below are the S&P 500 Index (SPX) components that have attracted the highest weekly 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 Microsoft Corporation (NASDAQ:MSFT), as traders up the bearish ante ahead of the company's after-the-close quarterly earnings report.

Most Active Weekly Options Table

As noted, Microsoft Corporation will follow in the footsteps of a number of its fellow Dow components when it steps into the earnings confessional after tonight's close. Traders are flooding the stock's options pits ahead of the results, but -- despite MSFT averaging a single-session post-earnings gain of 2.1% over the past four quarters -- many are betting on some earnings-induced turbulence through week's end.

Taking a quick step back, overall volume is running at two times the average intraday pace, with puts having a roughly 8,000-contract lead over calls. Two of MSFT's five most active options expire at Friday's close, with the equity's 10/24 46.50-strike call seeing the most action out of this duo. However, the majority of these calls went off at the bid price, implied volatility (IV) has soared 22.1 percentage points, and volume outstrips open interest, pointing to sell-to-open activity. By writing the calls, traders expect MSFT to stay south of the $46.50 through tomorrow's close, when the series expires.

Elsewhere, MSFT'S weekly 10/24 44.50-strike put has received notable attention, with 6,289 contracts on the tape at last check. A large portion of these puts traded at the ask price, IV is up 22.4 percentage points, and volume exceeds current levels of open interest. Summing it all up, it seems new positions are being purchased. Delta on the put is docked at negative 0.41, suggesting a roughly 2-in-5 chance the option will be in the money at expiration.

Today's skeptical stance among option traders is just more of the same for a stock that's up roughly 20% year-to-date to trade at $44.88. In fact, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day put/call volume ratio of 0.90 ranks in the highest percentile of its annual range. Should Microsoft Corporation (NASDAQ:MSFT) turn in another well-received earnings report, an unwinding of these bearish bets could create a tailwind for the shares.


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