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 Ford Motor Company (NYSE:F), Cisco Systems, Inc. (NASDAQ:CSCO), and Micron Technology, Inc. (NASDAQ:MU). Here is a quick look at today's interesting activity in these options pits.
With Ford Motor Company (NYSE:F) slated to unveil its quarterly results ahead of the bell on Wednesday, one group of speculators in today's session is betting on history to repeat itself. A healthy portion of the 3,145 weekly 7/26 16.50-strike puts traded have gone off on the ask side, implied volatility is up 1.5 percentage points, and volume is outstripping open interest. Summing it all up, it appears that a portion of the day's activity is of the buy-to-open kind. Based on the volume-weighted average entry price of $0.23, traders will begin to profit with each step south of $16.27 (strike price less the premium paid) F takes through next Friday's close. This breakeven mark represents expected downside of 2.9% from the stock's current perch at $16.75. As alluded to earlier, F has struggled on the heels of its quarterly results, despite exceeding analysts' bottom-line estimates in seven of the last eight quarters. Specifically, the equity has surrendered 1.8%, on average, in the three sessions after reporting earnings. For F's second quarter, Wall Street is calling for a profit of 37 cents per share -- a 7 cent improvement over its year-ago results.
Although Cisco Systems, Inc. (NASDAQ:CSCO) is down 0.3% today to linger near $25.78, calls are easily outpacing puts as the options of choice. Around 67,000 calls have crossed the tape so far, nearly three times the number of puts that have been exchanged. Short-term speculators are once again targeting the August 28 call, which has seen a collective 37,121 contracts -- including a number of large blocks -- trade for a volume-weighted average price (VWAP) of $0.21. Of the calls that have crossed the tape, 63% have done so at the ask price, implied volatility has ticked higher, and data from the International Securities Exchange (ISE) confirms the initiation of new bullish positions. In order for these traders to turn a profit on these calls, CSCO must jump 9.4% over the next four weeks in order to land above breakeven at $28.21 (strike plus VWAP). With CSCO taking its own turn in the earnings confessional after the market closes on Aug. 14, implied volatility at this strike is on the rise, and is currently inflated relative to the stock's 20-day historical (realized) volatility (31.7% vs. 15.8%). In other words, today's call buyers were willing to pay a pretty penny for their bullish bets.
Micron Technology, Inc. (NASDAQ:MU) is falling in concert with the broader equities market, with the stock off 0.6% at last check to trade at $13.61. Despite the modest pullback, a block of 8,000 January 2014 15-strike calls traded at the ask price of $1.41. Implied volatility has moved north, and the ISE corroborates that option traders are asserting a longer-term bullish outlook toward MU. By purchasing the out-of-the-money calls to open, the speculator expects MU to muscle its way north of $16.41 (strike price plus premium paid) over the next six months. Should the stock fail to topple the strike price, the most the trader stands to lose is the initial cash outlay. Given MU's 115% year-to-date advance, it's not surprising to see this bullish bias in the stock's short-term options pits, as well. In fact, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.31 ranks lower than 99% of similar readings taken in the past year, pointing to a distinct call-skewed trend among options with a shelf-life of three months or less.
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.