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Seadrill Limited (SDRL) Call Players Make a Rare Appearance

Seadrill Ltd's (NYSE:SDRL) May 13 call is in focus today

by 4/17/2015 2:44 PM
Stocks quoted in this article:

Seadrill Ltd (NYSE:SDRL) is following in the path of the broader equities market -- off 2% at $12.02 -- on news North Atlantic Drilling Ltd. (NYSE:NADL), of which SDRL owns a majority stake, has once again delayed a cooperation deal with Russia-based Rosneft. Today's sell-off hasn't fazed options traders, though, who are scooping up SDRL calls at 1.3 times the average intraday pace.

Most active by a mile is the equity's May 13 call, and signs suggest new positions are being purchased. By initiating the long calls, speculators expect SDRL to rally above $13 through the close on Friday, May 15 -- when the soon-to-be front-month options expire. Delta on the call is docked at 0.32, suggesting a less than 1-in-3 shot of an in-the-money finish.

Today's accelerated call activity marks a change of pace in SDRL's options pits. At 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 1.42 ranks in the 74th annual percentile.

What's more, SDRL's Schaeffer's put/call open interest ratio (SOIR) of 1.49 rests higher than 94% of all similar readings taken in the past 12 months. Simply stated, short-term speculators have been more put-heavy toward the stock just 6% of the time during the last year.

Looking at the charts, SDRL has been a long-term laggard, down roughly 64% year-over-year. However, the stock has been making some technical amends since bottoming at a six-year low of $8.58 in mid-March, and today's pullback seems to have found a foothold atop Seadrill Ltd's (NYSE:SDRL) year-to-date breakeven mark.

Daily Chart of SDRL Since April 2014 With Year-to-Date Breakeven

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Inside This $1.5 Million Bet on First Solar, Inc. (FSLR)

First Solar, Inc. (FSLR) put selling has been popular of late

by 4/17/2015 2:44 PM
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First Solar, Inc. (NASDAQ:FSLR) puts are flying off the shelves today at quadruple projected intraday levels. The majority of the puts exchanged are the result of 7,350-contract block at the May 60 strike, which was sold to open according to Trade-Alert.

By writing the FSLR puts to open, the seller collected a total net credit of over $1.5 million -- $2.08 premium * 7,350 contracts * 100 shares per contract. This represents the trader's maximum potential profit, provided the shares remain above the strike through the close on Friday, May 15, when the soon-to-be front-month options expire. However, the seller faces considerable downside risk if FSLR breaches $60 during the option's lifetime.

Put selling has actually been quite popular in recent months at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 50 sessions, specifically, nearly 7,500 puts have been sold to open, versus fewer than 4,300 bought to open.

This confidence isn't shared by everyone. Over half of the analysts tracking FSLR rate it a tepid "hold," and the equity's consensus 12-month price target of $64.62 is just a chip-shot away from current trading levels. In other words, the stock could be primed to benefit from some positive brokerage attention.

This is long overdue, given First Solar, Inc.'s (NASDAQ:FSLR) technical tenacity. While the shares are off 2.3% this afternoon at $61.47 amid a broad-market sell-off, they remain nearly 39% higher on a year-to-date basis, and have outperformed the broader S&P 500 Index (SPX) by 46.7 percentage points over the last three months.


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Baidu, Inc. (BIDU) Option Buyers Eye a Rebound

Baidu Inc (ADR) (BIDU) traders are buying long-term calls

by 4/17/2015 2:40 PM
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Options traders are targeting Baidu Inc (ADR) (NASDAQ:BIDU) today, as stocks slide in the wake of China's new trading rules. At last check, BIDU options were changing hands at double the intraday rate, with calls the contracts of choice.

One of the day's most active contracts is BIDU's September 280 call, where it appears buy-to-open activity is taking place. By purchasing this call at a volume-weighted average price (VWAP) of $1.27, speculators anticipate the shares to muscle their way north of $281.27 (strike plus VWAP) -- in uncharted territory -- by the close on Friday, Sept. 18, when the option expires.

Technically speaking, the shares of BIDU have marched steadily lower since hitting a Nov. 13 all-time high of $251.99, down 18.3% to linger near $205.98. Accordingly, sentiment in the options pits has been more bearish than normal, as BIDU's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.89 ranks in the 98th percentile of its annual range. Furthermore, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.00 is higher than 80% of all equivalent readings taken over the past year, showing that near-term traders are more put-skewed than usual.

Looking elsewhere, Baidu Inc (ADR) (NASDAQ:BIDU) has been held in high-esteem by the brokerage bunch. Specifically, 11 out of 12 covering analysts rate the stock a "strong buy." Also, BIDU's consensus 12-month price target of $250.65 represents a 21.7% premium to current trading levels.

Daily Chart of BIDU Since April 2014

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Bulls Keep the Faith in Wal-Mart Stores, Inc., Verizon Communications

Wal-Mart Stores, Inc. (WMT) and Verizon Communications Inc. (VZ) calls are popular today

by 4/17/2015 2:13 PM
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Dow components are really struggling today on overseas news. Among the 29 blue chips sitting in negative territory are Wal-Mart Stores, Inc. (NYSE:WMT) and Verizon Communications Inc. (NYSE:VZ), but option bulls continue to seek upside for both stocks.

WMT is currently sitting on a 1.4% deficit at $78.14, but the retailer's calls are being exchanged at more than double the usual intraday rate. Seeing likely buy-to-open activity are the May and June 80 calls, with buyers gambling the shares will muscle atop $80 by the respective expiration dates.

Looking at the charts, the underfoot $78 level has been crucial for WMT in the past. The area contained a number of rallies in 2014, and could now switch roles to act as support. Should this happen, the stock could benefit from a potential round of upgrades, as 16 of 21 analysts rate WMT a "hold" or worse.

Meanwhile, VZ is off a modest 0.5% at $49.04, amid news of a new pay TV plan. Longer term, the shares are up nearly 5% year-to-date.

On the options front, VZ calls are trading at 1.2 times what's expected at this point in the afternoon. Potential buy-to-open activity is detected at the in-the-money June 46 call, as speculators bank on the stock to resume its uptrend by June options expiration.

Analysts are far more bullish toward Verizon Communications Inc. (NYSE:VZ) than they are toward Wal-Mart Stores, Inc. (NYSE:WMT). In fact, 17 of 23 brokerage firms rate VZ a "buy" or better, compared to six "holds" and not a single "sell."


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Johnson Controls, Inc. (JCI) Option Bulls Take Charge

Johnson Controls Inc (JCI) reports earnings next week, and expectations are high

by 4/17/2015 1:45 PM
Stocks quoted in this article:

Call volume has exploded in Johnson Controls Inc's (NYSE:JCI) options pits. The contracts are changing hands at a rate 32 times what's normally seen at this point in the day, with heavy activity at the July 55 call. In fact, over 15,000 contracts have crossed here, more than three times as many as the next closest option. It appears traders are buying to open these calls, expecting JCI to topple $55 -- which would mark a record peak -- by July expiration.

Taking a step back, call buyers have been rushing to JCI for the last two weeks. In fact, over that time span at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), roughly 44 calls have been bought to open for each put. The resulting call/put volume ratio of 44.07 is an annual bullish peak. Also coming in at an annual extreme is JCI's Schaeffer's put/call open interest ratio (SOIR) of 0.41, which hasn't been lower during the last 12 months. This implies speculators targeting options that expire in the next three months are more call-focused now than at any other point during the past year.

JCI SOIR

Options bulls may be expecting the equity's earnings report -- scheduled for release next Thursday morning -- to launch the shares out of the $48-$51 range, where they've been churning between for well over a month. Still, Johnson Controls Inc (NYSE:JCI) has managed a 4.7% lead in 2015 -- thanks in part to some recent M&A buzz -- and was last seen 0.7% higher at $50.60.


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