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 Facebook Inc (NASDAQ:FB), American International Group Inc (NYSE:AIG), and Nokia Corporation (ADR) (NYSE:NOK). Here is a quick look at today's interesting activity in these options pits.
With its quarterly earnings due after today's close, Facebook Inc is seeing plenty of activity in the options pits. Total call volume is nearly three times what is typically seen, while put volume is running at twice the usual pace. In fact, FB is the most active equity in the options universe today. Of particular note is what appears to be a bull call spread, employing the September 30- and 35-strike calls. During the lunch hour, blocks of 19,800 contracts traded simultaneously -- the 30-strike option traded between the bid and the ask prices, at $1.53 apiece, while the 35 call traded south of the bid price, at $0.45 per contract. Volume exceeds open interest at both strikes, so it is likely the trader was buying to open the 30 calls and selling to open the 35 calls, spending a net debit of $1.08 per spread. The maximum profit of this spread, should Facebook Inc be trading at or above $35 at September expiration, is $3.92 (difference in strike prices less net debit). On the flip side, the maximum potential loss is simply 100% of the premium paid. This would occur at expiration if FB is perched at or below $30. This large-scale spread buyer may be hoping FB enjoys a pop higher after earnings, but is playing it safe by taking a longer-term approach and trading a spread, to lower the cost of entry (while also limiting the profit potential). FB shares are down 1% at $27.50 in mid-afternoon trading.
American International Group is set to issue its earnings report after the close tomorrow, and total option volume in the name has seen a 39% uptick today versus current levels. The most active strike is the August 40 put, where it appears traders could be cutting their losses ahead of this event, as the stock sits just south of breakeven at $41.29. Almost 6,100 contracts have traded at this out-of-the-money strike, nearly all of which crossed at the bid price. On April 26, similar volume traded off the ask price, for a volume-weighted average price (VWAP) of $2.12. If these are indeed the same traders who are active today, they are taking a modest loss, as the VWAP currently comes in at $1.53.
Although overall option volume is muted on Nokia today, one strike has garnered some notable attention. The May 4.5 put -- in the money by $1.15 with the stock trading at $3.35 -- saw 2,000 contracts cross the tape in a series of mid-sized block trades, all of which changed hands at the ask price of $1.17 per contract. Volume exceeds open interest, also, supporting the theory that these puts are being purchased to open as bearish short-term bets. Breakeven at expiration is therefore $3.33 (strike less premium paid), or just south of where the stock is currently trading. Delta on the put is currently negative 0.99, indicating a 99% chance the puts will be in the money at expiration on May 17. But just because the option is in the money doesn't mean today's put buyers will be profitable, given the breakeven point noted above.
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.