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Most Active Options: Cisco Systems (CSCO), Micron Technology (MU), AIG

CSCO, MU, and AIG are seeing notable options trading activity today

by 7/11/2013 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 Cisco Systems, Inc. (NASDAQ:CSCO), Micron Technology, Inc. (NASDAQ:MU), and American International Group Inc (NYSE:AIG). Here is a quick look at today's interesting activity in these options pits.

Cisco Systems, Inc. (NASDAQ:CSCO) ran to another new multi-year peak today, with the stock tagging the $25.90 mark for the first time since July 2010. This upward momentum stalled before the stock could take out the overhead $26 mark, prompting some speculators to eye this area as a short-term layer of resistance. Of the 19,152 July 26 calls that have traded, more than half have done so on the bid side, and data from the International Securities Exchange (ISE) confirms sell-to-open activity. Ideally, Cisco will remain south of $26 through next Friday's close -- the stock is currently lingering near $25.89 -- allowing the calls to expire worthless, and the traders to retain the initial net credit. According to Trade-Alert, the volume-weighted average price (VWAP) for the calls is $0.21.

Micron Technology, Inc. (NASDAQ:MU) has had a stellar rebound since bottoming out at an annual low of $5.16 in late October, with the shares up more than 146%. The stock entered a brief period of consolidation after touching a six-year high of $14.60 on July 1, but managed to find a foothold atop its 10-week moving average. The equity has bounced off this trendline in today's session -- which should please yesterday's crop of bulls --and was last seen up 1.2% to trade at $12.70. Short-term speculators are betting on the stock to maintain this upward momentum through next Friday's close, and are picking up the July 13.50 calls for a VWAP of $0.16. Roughly 5,700 contracts have crossed the tape here, 83% of which have done so at the ask price. There are no open positions at this strike, making it safe to assume that at least some of today's activity is of the buy-to-open variety. Based on the entry price, traders will begin to profit with each step above $13.66 (strike price plus the VWAP) MU takes through the close on July 19. Should the stock fail to topple the strike price, the most the traders stand to lose is the initial premium paid.

American International Group Inc (NYSE:AIG) jumped to its intraday high of $46.36 right out of the gate today. Although the equity quickly pulled back, one group of traders expects the stock to take back this level by tomorrow's close. The majority of the 1,189 weekly 7/12 46-strike calls that have been exchanged have gone off on the ask side, and implied volatility is on the rise, hinting at buy-to-open activity. The VWAP for the calls is $0.32, making breakeven $46.32 (strike plus VWAP), or less than 1% from the stock's current perch at $45.95. Technically, AIG has put on an impressive technical show, with the stock boasting a 49% year-over-year advance. Fundamentally, the insurance issue, along with General Electric Company (NYSE:GE), will be kept under the watchful eye of the Financial Stability Oversight Council after their financial stability was deemed risky. They are the first two non-financial companies to be subject to the regulations of the Dodd-Frank Act.

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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