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Options Check-Up: Citigroup Inc, Toll Brothers Inc, Under Armour Inc

Analyzing recent option activity on C, TOL, and UA

by 11/26/2014 7:53 AM
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Among the stocks attracting attention from options traders lately are financial behemoth Citigroup Inc (NYSE:C), housing concern Toll Brothers Inc (NYSE:TOL) and athletic apparel issue Under Armour Inc (NYSE:UA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on C, TOL, and UA.

  • It's been a mild year for C on the charts, as yesterday's 0.1% loss brought it to $54.33 -- just 4 percentage points above its year-to-date breakeven level. In the stock's options pits, speculators are mostly of the bearish variety. For example, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Citigroup Inc's 10-day put/call volume ratio of 0.54 ranks in the 74th annual percentile, showing puts have been bought to open over calls at a faster-than-normal rate in the past two weeks. On a volatility basis, C's near-term options are attractively priced, according to its Schaeffer's Volatility Index (SVI) of 13% -- only 4 percentage points from an annual low.

  • Like Citigroup, TOL is hovering near its year-to-date breakeven mark, and yesterday closed 0.6% lower at $34.94. Over the last 50 sessions, option traders have been betting on a move to the upside. Specifically, at the ISE, CBOE, and PHLX, for each Toll Brothers Inc put bought to open, traders have picked up 7.35 calls. What's more, calls have been bought to open at a faster pace only 12% of the time in the past year. The equity's short-term options are on the inexpensive side, with its SVI of 26% landing in the 31st annual percentile.

  • UA has been a strong mover on the charts, adding 74.2% year-over-year, including a gain of 1% yesterday to finish at $70.67. Somewhat surprisingly, several analysts remain uncertain about Under Armour Inc, with 12 out of 24 covering firms handing out "hold" or worse ratings. There appears to be room for analyst upgrades to push the equity even higher, should it continue its uptrend -- which is exactly what many options traders expect. At the ISE, CBOE, and PHLX, UA's 10-day call/put volume ratio of 3.24 ranks in the 90th annual percentile. The security's near-term options are near bottom-dollar, according to its SVI of 26%, in the 9th percentile of its annual range.


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Most Active Options Update: GoPro Inc (GPRO)

Call players continue to target GoPro Inc

by 11/25/2014 3:00 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 GoPro Inc (NASDAQ:GPRO), where short-term traders are rolling the dice on end-of-week gains.

Most Active Options Table

Option traders have shown a preference for long calls over puts on GoPro Inc in recent weeks. Specifically, speculators on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 1.53 calls for every put during the past 10 sessions.

This call-skewed trend is continuing today, as calls are outpacing puts by a roughly 2-to-1 margin. Most active on the call side is GPRO's weekly 11/28 75 strike, where 3,480 contracts are on the tape. The majority of these calls have traded on the ask side, and volume outstrips open interest, making it safe to assume new positions are being purchased.

Based on the volume-weighted average price (VWAP) of $1.04, breakeven at this Friday's close is $76.04 (strike plus VWAP). Profit for today's call buyers is theoretically unlimited beyond this point, while losses are capped at the initial cash outlay, should GPRO finish the week south of the strike price.

On the charts, GoPro Inc (NASDAQ:GPRO) has been a technical marvel since going public in late June, with the shares up roughly 160%. The stock is extending this momentum today, tacking on more than 3% to trade at $74.75, on no apparent news.


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Pre-Earnings Option Activity Heats Up On Hewlett-Packard Company (HPQ)

Hewlett-Packard Company puts and calls are trading at an accelerated clip today

by 11/25/2014 2:33 PM
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Option traders have set their sights on Hewlett-Packard Company (NYSE:HPQ) today, as the company prepares to tell all in the earnings confessional after tonight's close. Overall volume is running at four times the expected intraday amount, and per the equity's 30-day at-the-money implied volatility (IV) -- which is up 5.9% at 25.6% -- short-term contracts are in high demand. Drilling down, buy-to-open activity has been detected on both the put and the call sides, as traders wager on HPQ's post-earnings trajectory.

Most active in today's session is the weekly 11/28 36-strike put, where 7,824 contracts have changed hands -- mostly at the ask price, hinting at buyer-driven activity. IV is up 13.2 percentage points, and volume outstrips open interest, making it safe to assume new positions are being purchased. Delta on the put is docked at negative 0.16, suggesting a slim 16% chance the option will be in the money at Friday's close, when the weekly series expires.

Meanwhile, on the call side, a fresh batch of bullish bets is being initiated at HPQ's weekly 11/28 38.50 strike. These calls are being scooped up for a volume-weighted average price (VWAP) of $0.55, making breakeven at week's end $39.05 (strike plus VWAP), in territory not charted by HPQ since May 2011. Gains will accumulate north of here, while losses are capped at the initial premium paid, should the stock settle south of the strike at expiration.

Looking over the past three quarters, HPQ's post-earnings price action tends to side with bulls -- good news for the recent crop of option traders who have targeted the stock. In fact, over the past three quarters, Hewlett-Packard Company (NYSE:HPQ) has averaged a gain of 4.6% in the session subsequent to reporting. Today, the equity is 1.4% higher to trade at $38.02 -- extending its year-to-date advance to an impressive 36%.


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Most Active Weekly Options: Apple Inc. (AAPL)

Apple Inc.'s market capitalization reached an unprecedented $700 billion today

by 11/25/2014 1:44 PM
Stocks quoted in this article:

The 20 stocks listed in the table below are the names that have attracted the highest weekly options volume during the past 10 trading days. Those 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 Apple Inc. (NASDAQ:AAPL), as short-term bets are being placed amid a pair of fresh milestones.

Most Active Weekly Options Table

The big news surrounding Apple Inc. this afternoon is that its market capitalization hit $700 billion earlier -- making it, by far, the most valuable publicly traded company. What's more, the equity reached another record high of $119.75 -- thought it was last seen 0.3% lower at $118.29.

Elsewhere, AAPL options are flying off the shelves at a 75% mark-up to the intraday norm. Short-term strikes are in focus, as well, per the stock's 30-day at-the-money implied volatility (IV), which is 4.8% higher at 22.2%.

The two most active options are the weekly 11/28 119- and 120-strike calls, where nearly 117,000 total contracts have been exchanged. Activity is more-or-less evenly split between the bid and ask prices, IV is on the rise, and volume outstrips open interest. All told, it's safe to assume new positions are being sold and bought to open, respectively -- a theory partially confirmed by data from the International Securities Exchange (ISE).

The call writers expect AAPL will remain below the strikes through the end of the week, when the 11/28 series expires. By contrast, the buyers anticipate the shares will topple the aforementioned levels within the same time frame.

Technically speaking, Apple Inc. (NASDAQ:AAPL) has been on a tear. This year, the shares have advanced nearly 48%, and they've also outperformed the broader S&P 500 Index (SPX) by 12.2 percentage points over the last two months.


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Chesapeake Energy Corporation (CHK) Traders Grow Increasingly Bearish

Bearish betting has been gaining in popularity on Chesapeake Energy Corporation

by 11/25/2014 12:13 PM
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Chesapeake Energy Corporation (NYSE:CHK) puts are crossing the tape at a rate nearly four times what's typically seen at this point in the day, and are outpacing calls by roughly 3-to-1 margin. The stock's short-term contracts are in high demand, too, as evidenced by the equity's 30-day at-the-money implied volatility (IV), which has jumped 7.4% to 36.4% -- in the 83rd percentile of its annual range.

Most active by a mile is CHK's weekly 11/28 23.50-strike put, where 12,135 contracts have changed hands. (As a point of comparison, the next most active option has fewer than 950 contracts on the tape.) The majority of the positions at this near-the-money put have gone off at the ask price, IV has surged 11.1 percentage points, and volume outstrips open interest, making it safe to assume new positions are being initiated.

Although analysts have recently expressed optimism toward CHK, today's bearish positioning among option traders isn't too surprising, considering the equity has shed almost 21% since hitting a two-year peak of $29.92 in early July to trade at $23.73. What's more, it echoes the withstanding trend seen at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, Chesapeake Energy Corporation's (NYSE:CHK) 10-day put/call volume ratio of 1.15 across this trio of exchanges ranks in the 88th annual percentile, meaning puts have been bought to open over calls at a faster-than-usual clip in recent weeks.


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