Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Deckers Outdoor Option Players Eye Near-Term Gains

DECK's February 37.50 call saw buy-to-open activity yesterday

by 1/18/2013 10:37 AM
Stocks quoted in this article:

Calls were easily the options of choice on Deckers Outdoor Corp (NASDAQ:DECK - 36.72) Thursday. By the time the closing bell rang, roughly 20,000 contracts had crossed the tape, more than doubling the average daily volume for call options. By comparison, fewer than 8,800 puts changed hands. Traders turned their attention to the soon-to-be front-month series of options, and placed bets that DECK will enjoy some upside over the next four weeks.

The most active strike on the day was the stock's February 37.50 call, which saw north of 5,500 contracts change hands. The majority of these went off at the ask price, and open interest added more than 4,300 positions overnight, hinting at buy-to-open activity. The calls traded at a volume-weighted average price (VWAP) of $2.42, making breakeven at this out-of-the-money option $39.92 (strike price plus VWAP). In other words, yesterday's call buyers need DECK to rise 8.7% above current levels by the close on Friday, Feb. 15 (when the options expire) for these bets to be profitable.

Widening the scope reveals traders have been buying to open calls on DECK with some rapidity of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have scooped up 226 calls for every 100 puts throughout the past 10 sessions. The resultant call/put volume ratio of 2.26 ranks higher than 71% of other such readings taken in the last year, pointing to a healthier-than-usual appetite for bullish bets over bearish in recent weeks.

On the charts, DECK has been a long-term technical laggard, with the shares down around 56% on a year-over-year basis. However, the stock has been attempting to stage a rebound in recent months, tacking on roughly 29% since hitting a multi-year low of $28.53 on Oct. 31. More recently, the equity has been stuck trading between support at its 10-week moving average, and resistance at its 32-week trendline since late November.

Should DECK fail to topple the $39.92 mark by February expiration, the most yesterday's call buyers can lose is the initial premium paid. With implied volatility at this strike currently deflated relative to the stock's 20-day historical (realized) volatility (55% vs. 63.5%), traders can rest easy knowing they picked up these bets at a bargain.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.