Stocks quoted in this article:
The 20 stocks listed below are the members of the S&P MidCap 400 Index (MID) that have seen the highest total options volume (calls and puts combined) during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One mid-cap name seeing some attention in the call pits today is semiconductor concern Advanced Micro Devices, Inc. (NYSE:AMD).
During the past couple of weeks, the AMD options crowd has displayed above-average demand for long put options, relatively speaking. The stock's 10-day put/call volume ratio -- measuring buy-to-open activity at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- stands at 0.55, in the 85th annual percentile. In short, this means that while nearly two calls have been bought to open for every put in the past two weeks, the ratio of puts to calls is nonetheless higher than 85% of comparable readings taken during the last year.
Today, however, calls have taken center stage. Nearly 7,600 contracts have crossed the tape, outnumbering puts by a factor of roughly 9. Most active are the April 4 call and the weekly 5/2 4-strike call, and per data from the ISE, it appears blocks at these out-of-the-money strikes are being executed on the opening side.
Mid-sized blocks adding up to more than 1,500 contracts were reportedly sold to open on the April call, while symmetrical blocks were purchased to open at the 5/2 strike, creating a long calendar spread. Based on the volume-weighted average prices of each, the spread was purchased for a net debit of 6 cents per pair of contracts, which is also the maximum potential loss on the spread.
The ideal scenario for this spread buyer is for AMD to be sitting squarely at the $4 level at April options expiration. At this point, the April call will expire worthless, and the 5/2 weekly call can be closed with a month of time premium remaining. (The trader might also opt to keep the longer-dated call open as a garden-variety long position through the next two weeks.) Note that AMD earnings are tentatively scheduled for the week of April 14, which coincides with options expiration.
If AMD rallies through the strike, the short front-month call is effectively "covered" by the longer-dated long call. Meanwhile, if Advanced Micro Devices, Inc. (NYSE:AMD) heads south, the calls will both expire worthless, and only the initial net debit will be surrendered.