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Clearwire Corporation (CLWR) Bears Forecast a Near-Term Trek Lower

CLWR's front-month series of options attracts put players

by 2/26/2013 12:37 PM
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Bearish bettors have been enamored with Clearwire Corporation (NASDAQ:CLWR - 3.21) lately, according to data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, the stock's 10-day put/call volume ratio of 0.25 ranks higher than 87% of similar annual readings, indicating traders have been purchasing puts over calls at a faster-than-usual pace in recent weeks. Likewise, CLWR's Schaeffer's put/call open interest ratio (SOIR) of 0.85 is just 5 percentage points shy of a yearly peak, meaning near-term options players have rarely been more pessimistic toward the shares during the last 12 months.

This campaign for CLWR puts over calls has carried over into today's session, as well. More than 5,100 of these pessimistic bets have crossed the tape so far, which is an impressive 35 times the security's expected intraday put volume. By contrast, just over 1,900 calls have been exchanged. Not surprisingly, the March series of options is seeing most of the action. Schaeffer's Volatility Index (SVI) of 33% ranks higher than just 6% of comparable readings taken within the past year. In other words, the stock's front-month options are relatively cheap right now.

Most active has been the March 3.50 put, which has seen 5,000 contracts trade at a volume-weighted average price (VWAP) of $0.39. The bulk of these in-the-money puts changed hands at the ask price, and today's volume has easily surpassed current open interest levels -- indicators of buy-to-open activity. Essentially, traders are betting on CLWR to fall south of $3.11 (strike price less the VWAP) by the time front-month options expire. However, even if the equity fails to retreat ahead of expiration on March 15, the most today's put buyers stand to lose is the initial premium paid.

CLWR has had an impressive run on the charts lately, having gained about 52% on a year-over-year basis, and around 11% year-to-date. The telecom issue has also bested the broader S&P 500 Index (SPX) by more than 33 percentage points during the past 60 sessions. Meanwhile, a look at the charts shows that the security is on pace to finish a fourth-consecutive month atop its 20-month moving average, which had previously acted as resistance. Nevertheless, the delta for the March 3.50 put is docked at negative 0.97, meaning the option has a 97% chance of finishing in the money.


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