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), International Business Machines Corp. (NYSE:IBM), and QUALCOMM, Inc. (NASDAQ:QCOM). Here is a quick look at today's interesting activity in these options pits.
After announcing some M&A news with cybersecurity concern Sourcefire, Inc. (NASDAQ:FIRE) this morning, Cisco Systems, Inc. (NASDAQ:CSCO) received a pair of price-target hikes from FBN Securities and Wedbush. The equity has been unable to capitalize on these upbeat analyst notes, and was last seen 0.2% lower to trade at $25.68. The modest pullback hasn't stopped call players from piling on. Around 96,000 calls have crossed the tape thus far, or nearly three times the average intraday volume. However, not all of this activity is of the traditional bullish sense. The August 27 call has emerged as the most active strike today, where 44,390 contracts (including several large blocks) have changed hands, mostly at the bid price. However, it is not entirely clear at the moment whether these positions are being opened or closed. Further on down the line, the August 30 call has seen 3,208 contracts change hands, 96% of which have done so on the bid side. Volume is outstripping open interest, and data from the International Securities Exchange (ISE) confirms sell-to-open activity. Ideally, CSCO will stay south of $30 through August expiration, 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 deep out-of-the-money (OTM) calls is $0.32. On the charts, CSCO has not traded north of $30 since November 2007.
Calls have easily emerged as the options of choice on International Business Machines Corp. (NYSE:IBM) today. By the numbers around 17,000 calls have crossed the tape, compared to roughly 10,000 puts. One group of speculators is scooping up the stock's September 210 calls, as they eye a move to levels not seen by IBM since late May. Of the 1,234 contracts traded, 88% have gone off at the ask price, and volume is exceeding current levels of open interest, pointing to buy-to-open activity. Based on the VWAP of $0.44, traders expect IBM to land north of $210.44 (strike price plus the VWAP) by the close on Sept. 20. This breakeven mark represents expected upside of 7.4% from the equity's present price of $195.97. On the charts, IBM hasn't traded north of $210 on an intraday basis since May 31. Although the stock experienced a brief post-earnings price surge last Thursday, its 50-day moving average quickly put a halt to this upside. Should the stock fail to topple the strike price over the call's lifetime, though, the most today's traders stand to lose is the initial cash outlay.
Speculators are loading up on short-term bullish bets in QUALCOMM, Inc. (NASDAQ:QCOM) options pits, ahead of the semiconductor name's turn in the earnings confessional tomorrow evening. Most active by a slim margin is the weekly 7/26 65-strike call, where more than 5,000 contracts have changed hands. Two-thirds of the trades have gone off at or near the ask price, volume exceeds open interest, and implied volatility has spiked more than 12 percentage points. These signs all point to the creation of new long positions. Given the VWAP of $0.42, breakeven for this short-term call (at expiration) is $65.42, or the strike price plus the premium paid. This requires a jump of 4.9% from the stock's current perch at $62.39 over the next three-plus days. QCOM has not historically been a volatile post-earnings performer, however. In the day after earnings were released (during the last seven quarters), the shares have risen an average of 1.4%. In the week following, the stock has gained an average of just 1.6%. The options market is rather skeptical, as the out-of-the-money weekly call has a delta reading of 0.23, suggesting a less than 1-in-4 chance of being in the money by Friday's closing bell.
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.