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Most Active Options: Freeport-McMoRan, Netflix, Inc. (NFLX), and IBM

FCX, NFLX, and IBM are seeing notable options trading activity today

by 4/30/2013 1:58 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 Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), Netflix, Inc. (NASDAQ:NFLX), and International Business Machines Corp. (NYSE:IBM). Here is a quick look at today's interesting activity in these options pits.

Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has had a rough go of things since hitting an annual high of $43.65 in mid-September, with the shares off roughly 31% to trade at $29.94. One speculator in today's session bet on an additional pullback over the next nine months, and picked up 1,000 January 2014 29-strike puts near the ask price for $3.42. Only 392 contracts currently make up open interest here, so it's safe to assume that new bearish positions are being created. In order for these out-of-the-money LEAPS to be profitable, Freeport-McMoRan must slide nearly 15% to land below breakeven at $25.58 (strike price less premium paid) by options expiration in January. Delta for this put is docked at negative 0.44, meaning for every dollar FCX drops between now and expiration, the put will add $0.44. Conversely, for every dollar FCX adds, this contract will lose $0.44.

Netflix, Inc. (NASDAQ:NFLX) is continuing to add to its impressive 132.8% year-to-date advance, with the stock up 0.4% at last check. Diving into today's option activity, it appears that some traders are betting on some continued gains through week's end. NFLX's weekly 5/3 220-strike call is the most active position thus far, where 3,211 contracts have gone off for a volume-weighted average price (VWAP) of $2.91. A healthy portion of these positions has crossed at the ask price, implied volatility was last seen 1.4 percentage points higher, and volume is outstripping open interest, pointing to buy-to-open activity. Breakeven for these out-of-the-money calls is $222.91 (strike plus VWAP), or 3.4% above the stock's current perch at $215.61. Given Netflix's technical tenacity, optimism seems to be growing outside of the options pits, as well. Despite carrying just six "strong buy" suggestions, compared to 20 "hold" or worse ratings, analysts appear to be changing their tune. Last Friday, in fact, Lazard upped its price target on the outperforming equity.

International Business Machines Corp. (NYSE:IBM) has been on the mend after bottoming out at $187.68 last Monday in a post-earnings slump, with the shares bouncing 7.2%. This upward momentum has had call players circling, and in today's session, traders are targeting the weekly 5/3 200 strike. The majority of the 4,040 contracts traded have changed hands at the ask price, implied volatility has surged 3.7 percentage points, and volume is exceeding open interest levels, suggesting new positions are being created. While the stock's 1% pop today has pushed the calls into the money, the options will not become profitable until IBM topples the $201.32 mark (strike plus VWAP of $1.32). This breakeven level is just a hair's breadth from the equity's present price of $201.12. From a wider sentiment standpoint, it's been puts, and not calls, that option players have preferred in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 1.08 ranks higher than 85% of other such readings taken in the past year, implying puts have been accumulated over calls at an accelerated clip throughout the past 10 weeks.

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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