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Most Active Options: Advanced Micro Devices, Netflix, Inc., Yahoo! Inc

AMD, NFLX, and YHOO are seeing notable options trading activity today

by 7/22/2013 3:14 PM
Stocks quoted in this article:

Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Advanced Micro Devices, Inc. (NYSE:AMD), Netflix, Inc. (NASDAQ:NFLX), and Yahoo! Inc. (NASDAQ:YHOO). Here is a quick look at today's interesting activity in these options pits.

Advanced Micro Devices, Inc. (NYSE:AMD) has been unable to capitalize on Friday's upbeat analyst attention, with the stock down more than 10% over the last two sessions to linger near $3.91. This negative price action not only has the equity sitting on the short-sale restricted list today, but also on pace to close south of $4 for the first time since July 10. This has prompted one group of speculators to bet on this level as a near-term layer of resistance. Of the 7,628 August 4 calls that have changed hands, 80% have done so on the bid side, and data from the International Securities Exchange (ISE) confirms sell-to-open activity. Ideally, AMD will remain churning beneath $4 through the close on Aug. 16, allowing the options to expire worthless, and the traders to retain the initial net credit as their full potential reward. According to Trade-Alert, the volume-weighted average price (VWAP) for the near-the-money calls is $0.21. Meanwhile, more cautious call players are scooping up the August 4.50 calls for a VWAP of $0.09. The majority of these have also crossed on the bid side, and the ISE indicates a number of positions have been sold to open. In the past year, AMD has closed north of the $4.50 mark just once -- last Thursday, to be exact.

Option players are scooping up calls at an accelerated clip on Netflix, Inc. (NASDAQ:NFLX) today, ahead of tonight's turn in the earnings confessional. Around 62,000 calls have changed hands, or more than two times the average intraday volume. A number of traders are betting on a big earnings win, and are targeting the weekly 7/26 315-strike call. More than half of the 2,364 contracts traded have crossed at the ask price, implied volatility has soared 18 percentage points, and volume is outstripping open interest, indicating the initiation of new bullish bets. The VWAP for the deep out-of-the-money (OTM) calls is $2.09, meaning traders will begin to profit with each step above $317.09 (strike plus VWAP) NFLX takes through Friday's close. Not only does this breakeven mark represent expected upside of 22.5% to the stock's current price of $258.83, but also uncharted territory. This optimism isn't unwarranted, considering NFLX tacked on 24.4% the day following its first-quarter earnings report, despite falling short of analysts' bottom-line expectations. For NFLX's second-quarter, Wall Street is calling for a per-share profit of 40 cents -- a 29-cent improvement over its year-ago results.

The $29 level is in focus on Yahoo! Inc. (NASDAQ:YHOO) today, with a handful of speculators eyeing a move north of this mark over the next several weeks. With 11,958 contracts having changed hands already, the August 29 call is easily the most sought-after strike today. A healthy portion of these positions have gone off on the ask side, implied volatility is 2.4 percentage points higher, and volume exceeds current levels of open interest. Summing it all, it appears that a portion of today's activity is of the buy-to-open variety. The VWAP for the OTM calls is $0.47, making breakeven $29.47 (strike plus VWAP), or 5.3% above YHOO's present price of $28.00. However, diving deeper into the data reveals that one speculator who has yet to be convinced by YHOO's 41% year-to-date return is buying to close his August 29 calls, and rolling out his neutral-to-bearish bet by one month. Specifically, two symmetrical blocks of 2,470 August 29 and September 29 calls changed hands at the ask price of $0.43 and the bid price of $0.82, respectively. The latter is marked opening, suggesting the trader expects YHOO to remain below $29 through September expiration.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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