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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB), Merck & Co., Inc. (NYSE:MRK), and Citigroup Inc (NYSE:C). Here is a quick look at today's interesting activity in these options pits.
The technical struggles are continuing for Facebook Inc (NASDAQ:FB) today, with the stock down more than 2% to trade at $23.83. The equity has now shed more than one-quarter of its value since hitting a year-to-date high of $32.51 on Jan. 28. One group of speculators in today's session is calling for even more downside over the next seven weeks by picking up the July 23 put for a volume-weighted average price (VWAP) of $0.83. Of the 7,387 contracts traded, 70% have gone off at the ask price, implied volatility is on the rise, and data from the International Securities Exchange (ISE) confirms that a number of positions have been bought to open. Based on the average entry price, these out-of-the-money (OOM) calls will become profitable should Facebook breach the breakeven mark of $22.17 (strike less VWAP) by the close on Friday, July 19. From a wider sentiment standpoint, it's been calls, and not puts, that option traders have preferred. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 249 calls for every 100 puts during the past 20 sessions. In the front-month series, this has translated into heavy accumulations of call open interest at the overhead June 24 strike. In the near term, this layer could serve as resistance, as the nearly 17,400 contracts that reside here begin to unwind ahead of expiration.
Merck & Co., Inc. (NYSE:MRK) rallied to the $49.36 mark today -- its loftiest perch since January 2008 -- on reports the pharmaceutical concern had positive clinical-test results for lambrolizumab, an experimental drug used to fight skin cancer, melanoma, and non-small cell lung cancer. The news prompted some bullish attention from the brokerage bunch, with J.P. Morgan and MKM Partners both raising their respective price targets (to $54 from $52, and by $5 to $59). Merck has pared some of its earlier gains, and was last seen hovering near $48.76. Option bulls are betting for a deeper trek into multi-year high territory (and a breakthrough of the round-number $50 level), and are scooping up the June 50 call. The majority of the 18,320 contracts traded have changed hands at the ask price, and volume is outstripping open interest, pointing to buy-to-open activity. The VWAP for the OOM calls is $0.48, making breakeven $50.48 (strike plus VWAP). The options market isn't too confident the call will find its way into the money over the next three weeks, as delta for the option is currently perched at 0.29, or 29%. In other words, there is a less than 1-in-3 chance the position will topple the strike price before the close on June 21.
Citigroup Inc (NYSE:C) is following in the bearish footsteps of the broad market today, with the stock down roughly 1.3% in afternoon trading. This negative price action shouldn't last for long, according to option traders that are targeting the weekly 6/7 52.50-strike call. A healthy portion of the 9,397 contracts that have crossed the tape at this OOM strike have done so at the ask price, implied volatility has soared 5.6 percentage points, and volume is handily exceeding current levels of open interest. Summing it all up, it appears that new bullish positions are being initiated here today. By purchasing the calls for a VWAP of $0.35, traders will begin to profit with each step north of $52.85 C takes through week's end. This breakeven mark represents expected upside of 2.9% to the stock's current perch at $51.31. Given C's technical tenacity -- the stock has more than doubled in value during the past 52 weeks -- it is understandable why option traders would bet on quick resumption of this uptrend. In fact, the positive price action had Citigroup flirting with its upper Bollinger Band late last week, suggesting a near-term pullback may have been in the cards.
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.