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Lululemon Athletica inc. (LULU) Rumor Mill Has Bulls Piling On

Lululemon Athletica inc. (LULU) calls are crossing the tape at a rate five times the intraday average

by 3/5/2015 3:15 PM
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At its intraday peak, Lululemon Athletica inc. (NASDAQ:LULU) was up nearly 4% amid what Trade-Alert said was unconfirmed takeover chatter, but has since erased these gains to trade down 0.9% at $64.91. Nevertheless, call players are blitzing LULU, with the contracts trading at a rate five times the intraday average -- and a number of speculators betting on the equity to resume its upside by week's end.

Specifically, LULU's weekly 3/6 66-strike call has seen the most action, with 5,691 contracts on the tape -- more than half of the equity's total intraday call volume. All signs suggest buy-to-open activity, as traders gamble on LULU to reclaim its perch atop $66 by tomorrow's close, when the weekly series expires. Although the stock was north of this mark earlier today, delta on the call is currently perched at 0.24, suggesting a less than 1-in-4 chance the option will expire in the money.

Today's accelerated call activity is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), LULU's 50-day call/put volume ratio of 2.65 ranks in the 81st percentile of its annual range. Simply stated, calls have been bought to open over puts at a faster-than-usual clip in recent months.

This rush toward calls shouldn't be too surprising, given Lululemon Athletica inc.'s (NASDAQ:LULU) technical tenacity. Over the past four months, the equity has surged more than 48%, thanks to a lift from its 40-day moving average. What's more, the shares have been making a string of higher highs along the way, including hitting a fresh 52-week peak of $68.99 on Monday.

Daily Chart of LULU Since November 2014 With 40-Day Moving Average

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Costco Wholesale Corporation (COST) Earnings Spark Eleventh-Hour Bets

Costco Wholesale Corporation (COST) traders are buying short-term 150-strike options

by 3/5/2015 2:53 PM
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After releasing an impressive fiscal second-quarter earnings report earlier today, Costco Wholesale Corporation (NASDAQ:COST) is up 2.6% to reach $151.02, bringing the stock's year-over-year gain to 33.3%. Accordingly, activity in the options pits is heating up, with speculators gambling on the retailer's short-term trajectory.

COST options are moving at three times the usual intraday pace today, with the weekly 3/6 150 strike seeing buy-to-open action on both sides. By purchasing the calls, traders expect the security to extend its journey north of $150 through tomorrow's close, when the weekly contracts expire. On the flip side, the put buyers expect COST to retreat beneath the strike by the end of the week.

Delta on the weekly 150-strike call stands at 0.69, implying a 69% chance of expiring in the money. Meanwhile, delta on its put counterpart has fallen to negative 0.27, from negative 0.76 at yesterday's close.

From a broader perspective, put buying has picked up over the last 10 weeks. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.91 stands 13 percentage points away from an annual high. Should Costco Wholesale Corporation (NASDAQ:COST) continue its ascent, a mass exodus of option bears could propel the shares even higher.

Daily Chart of COST Since March 2014

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Mobileye NV (MBLY) Options Heat Up as Stock Rallies

A note from the Mobileye NV (MBLY) board has option bulls champing at the bit

by 3/5/2015 2:11 PM
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Driver-assistance software provider Mobileye NV (NYSE:MBLY) has rocketed 6% higher to $36.89, after the company's board said it may not proceed with a secondary offering due to lackluster sell-side demand. Against this backdrop, option players are scrambling to place bullish bets on MBLY, which is testing resistance at its 10-week moving average.

Weekly Chart of MBLY since October 2014 with 10-Week Moving Average

Intraday call volume is running at twice the average clip, and is outpacing MBLY put volume by a margin of roughly 5-to-1. Most popular is the out-of-the-money March 39 call, which has seen buy-to-open activity. By purchasing the calls to open, the buyers expect MBLY to muscle north of $39 -- a feat not accomplished in a month -- by the close on Friday, March 20, when front-month options expire.

In light of the equity's surge today, delta on the call has doubled, to 0.26 from 0.13 at yesterday's close. In other words, the contracts now have about a 26% chance of expiring in the money.

However, it's worth noting that short interest on Mobileye NV (NYSE:MBLY) -- which has shed about 9% in 2015 -- represents 14.5% of the stock's total available float. At the equity's average pace of trading, it would take more than six sessions to repurchase these pessimistic positions. With short interest elevated, it's possible that today's call buyers are short sellers looking to hedge against an extended rally in the short term.


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Are Higher Highs Ahead for bluebird bio, Inc. (BLUE)?

Both options traders and analysts are targeting all-time peaks for bluebird bio Inc (BLUE)

by 3/5/2015 2:00 PM
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Some big-time M&A news has brought biotechs into focus today, and drugmaker bluebird bio Inc (NASDAQ:BLUE) is just one of the names benefiting from the sector-related tailwinds. At last check, the stock was up 9.7% at $109.77, after earlier topping out at an all-time peak of $109.99. The positive price action has sparked a rush of call activity in BLUE's options pits, with the contracts crossing the tape at more than five times what's typically seen at this point in the day. Plus, the stock's 30-day at-the-money implied volatility has surged 8.3% to 66.2% -- signaling elevated demand for short-term options.

In fact, eight of BLUE's 10 most active options expire in the front-month series, with the equity's March 110 call receiving notable attention. By all accounts, new positions are being purchased here, as traders roll the dice on a move to fresh record highs by the close on Friday, March 20 -- when the series expires. Amid today's surge, delta on the call has jumped to 0.50 from 0.21 at last night's close, indicating an increased probability the option will be in the money at expiration.

From a wider sentiment perspective, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.19 BLUE calls for each put over the past 10 sessions. What's more, the stock's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) is currently docked at 0.42. In other words, near-the-money call open interest more than doubles put open interest in the March-dated series.

This optimism is echoed outside of the options pits, as well, which isn't too surprising considering shares of bluebird bio Inc (NASDAQ:BLUE) have more than quadrupled over the past 52 weeks. For starters, all seven analysts covering the shares deem them worthy of a "strong buy" recommendation. Additionally, the average 12-month price target of $124 stands at a 14% premium to current trading levels -- and, more importantly, in territory yet to be charted.


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Are ACADIA Pharmaceuticals Inc. (ACAD) Shorts Feeling the Heat?

ACADIA Pharmaceuticals Inc. (ACAD) call buyers expect more short-term upside

by 3/5/2015 12:17 PM
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ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is extending its quest for all-time highs, peaking at $40.25 earlier. At last check, the shares were 4.2% higher at $39.75, and option players are rolling the dice on even more upside for the drugmaker.

ACAD call volume is running at three times the average midday pace, and has more than doubled put volume thus far. Potential buy-to-open activity has been detected at the March 40 and April 38 calls, which are most popular on the day. By purchasing the former, the buyers expect ACAD to extend its journey north of $40 by the close on Friday, March 20, when front-month options expire. The April 38 call buyers are slightly more conservative, gambling on ACAD to continue its ascent north of $38 over the next six weeks.

Digging even deeper, the volume-weighted average price (VWAP) of the front-month calls is $1.61, meaning the buyers will start to profit if ACAD topples $41.61 (strike plus VWAP) by options expiration. Meanwhile, the VWAP of the back-month calls is $3.32, putting at-expiration breakeven at $41.32.

Despite ACADIA Pharmaceuticals Inc.'s (NASDAQ:ACAD) record-setting ascent, there's still plenty of room on the bullish bandwagon. While analysts are waxing optimistic, short sellers are likely feeling the heat. Short interest represents 20.8% of ACAD's total available float, which would take three weeks to buy back, at the stock's average pace of trading. A continued short squeeze could propel the shares even higher.


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