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Most Active Options: AIG, Yahoo! Inc., and Bank of America Corp (BAC)

AIG, YHOO, and BAC are seeing notable options trading activity today

by 5/10/2013 2:58 PM
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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are American International Group Inc (NYSE:AIG), Yahoo! Inc. (NASDAQ:YHOO), and Bank of America Corp (NYSE:BAC). Here is a quick look at today's interesting activity in these options pits.

American International Group Inc (NYSE:AIG) has been in consolidation mode since tagging a two-year peak of $45.85 on Monday, with the shares off 4.4% to trade at $43.84. One group of skeptics in today's session is betting on an additional slide over the next week by picking up AIG's May 43.50 puts for a volume-weighted average price (VWAP) of $0.42. The vast majority of the 1,303 contracts traded have gone off at the ask price, and only 22 contracts make up open interest here, making it safe to assume that a fresh batch of bearish positions is being initiated. In order for these near-the-money puts to be profitable, AIG must slide 1.7% by next Friday's close to land below breakeven at $43.08 (strike less VWAP). Should the stock fail to breach the strike price, the most the traders have risked is the initial premium paid. With implied volatility at this strike deflated relative to the stock's 20-day historical (realized) volatility (23.6% vs. 38.9%), today's put buyers can rest easy knowing premium is relatively inexpensive at the moment.

Today's 2.1% pop for Yahoo! Inc. (NASDAQ:YHOO) helped push the stock to a new four-year high of $26.83 today, and caused speculators to scramble to cash in their bullish bets. With the stock currently trading at $26.77, the June 26 call has seen a flurry of activity, with nearly all of the 5,210 contracts crossing at the bid price. Data from the International Securities Exchange (ISE) confirms that a number of positions have been sold to close for a VWAP of $1.26. Today's upward momentum is just more of the same for a stock that's tacked on nearly 34% year-to-date. Going forward, Yahoo could be poised to continue its run higher on the back of some contrarian-related tailwinds. According to Thomson Reuters, no fewer than 20 out of 33 analysts maintain a "hold" or worse suggestion toward the technical outperformer, and the consensus 12-month price target of $26.32 represents a discount to YHOO's current perch. In other words, the door is wide open for an additional round of upgrades and/or price-target hikes to help fuel YHOO's fire.

Bank of America Corp (BAC) is adding to its roughly 69% year-over-year gain today, with the stock up 0.6% at $12.99. The advance comes amid reports that New York Attorney General Eric Schneiderman may have to withdraw a multi-billion-dollar mortgage-related lawsuit toward BAC, based on a previously settled court claim. In the equity's options pits, meanwhile, traders are targeting the weekly 5/24 12.50-strike put, which has seen more than 6,300 contracts change hands for a VWAP of $0.08. Almost all of these contracts have crossed at the bid price, and volume exceeds current levels of open interest, pointing to sell-to-open activity. Ideally, BAC will maintain its perch atop the $12.50 mark over the next two weeks, allowing the puts to expire worthless, and the traders to retain the initial net credit, which is also the full potential profit on the play.

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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