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. 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 equity seeing attention from put buyers today is athletic apparel name Under Armour Inc (NYSE:UA).
Put traders have swooped into the UA options pits today, as nearly 4,400 puts have crossed the tape, or more than double what's typically seen by this point of an average trading day. Most active is the May 115 put, where a block of 1,000 contracts traded near the ask price at $6.98 per contract. Implied volatility has ticked higher and volume exceeds open interest by a notable margin. Combined, these clues suggest the in-the-money puts are being purchased to open, which data from the International Securities Exchange (ISE) confirms. The puts are a bet that UA will remain south of the 115 strike for the next several weeks. If the stock instead continues its long-term trek higher, the most on the line is the premium paid.
Puts have been the options of choice for UA speculators of late. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) during the last 10 days, traders have scooped up 231 puts for every 100 calls, resulting in a put/call volume ratio that is higher than 97% of other readings from the past year. In other words, demand for long puts (relative to long calls) has escalated in recent weeks.
Given the stock's aforementioned long-term advance -- UA has gained more than 120% during the last year to rest at $113.89 -- it is possible that UA shareholders were responsible for some of the recent put buying, particularly at out-of-the-money strikes. By scooping up protective puts, traders who own the stock but are nervous about a short-term pullback can part with a small premium in exchange for peace of mind.
On the fundamental front, the shares will split 2-for-1 on Monday, April 14, for shareholders of record as of March 28. For those holding option contracts, the number of contracts owned will be multiplied by two, while the strike will be cut in half. For example, today's 1,000-contract block of the May 115 puts will become 2,000 contracts of the May 57.50 puts.
Also, Under Armour Inc (NYSE:UA) is due to report first-quarter earnings on the morning of Thursday, April 24. The company has consistently topped analysts' expectations during the last eight quarters, and has enjoyed a post-earnings single-session gain of 5.7%, on average. If history repeats itself, it will not be good news for the recent crop of "vanilla" put buyers.