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Most Active Options: Hewlett-Packard Company, Netflix (NFLX), and Vale

HPQ, NFLX, and VALE are seeing notable options trading activity today

by 4/17/2013 2:45 PM
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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Hewlett-Packard Company (NYSE:HPQ), Netflix, Inc. (NASDAQ:NFLX), and Vale SA (ADR) (NYSE:VALE). Here is a quick look at today's interesting activity in these options pits.

Hewlett-Packard Company (NYSE:HPQ) traded as low as $20.47 today, prompting some speculators to cash in their bearish bets ahead of Friday's expiration. HPQ's April 20.50 put is the most active strike of the day, where 5,341 contracts have changed hands at a volume-weighted average price (VWAP) of $0.17. The majority of these contracts have crossed at the bid price, and implied volatility has dropped 3.1 percentage points, suggesting some of these traders are selling to close their positions. From a wider sentiment standpoint, option players have been amping up their bearish exposure on HPQ in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 2.00 ranks higher than 96% of other such readings taken in the past year. Simply stated, puts have been bought to open over calls at a near annual-high clip. At last check, Hewlett-Packard had pared a small portion of its earlier losses, but was still down 2.5% to trade at $20.50.

Shares of Netflix, Inc. (NASDAQ:NFLX) have hit a rough patch of late, with the stock down almost 10% month-to-date. This downward spiral is being exacerbated in today's session, with the stock off 2.8% to trade at $171.05. One group of option players is refusing to capitulate to this negative price action, and is picking up the stock's April 175 calls for a VWAP of $2.02. A healthy portion of the 4,889 contracts traded here have gone off at the ask price, and implied volatility was last seen 3.7 percentage points higher, hinting at buy-to-open activity. By purchasing these out-of-the-money calls, traders will begin to profit with each step above breakeven at $177.02 (strike price plus VWAP) NFLX takes through Friday's close, when front-month options expire. The options market isn't quite as optimistic as these option players, as delta for the call is currently perched at 0.29, or 29%. In other words, there's a less than 1-in-3 chance the position will land in profitable territory ahead of expiration.

Global mining stocks have had a tough week, thanks to some disappointing economic data out of China. Brazilian-based Vale, for instance, has shed nearly 11% week-to-date, and fell to a four-year nadir of $15.47 earlier in today's session. Despite this move south, calls have emerged as the options of choice on the stock. Around 30,000 calls have changed hands thus far, compared to roughly 17,000 puts. VALE's April 16 call is one of the more sought-after strikes today, where 68% of the 3,875 contracts traded have changed hands at the ask price. With implied volatility soaring 13.8 percentage points, and volume outstripping open interest, it can be assumed that new positions are being initiated. Breakeven for the out-of-the-money calls is $16.17 (strike plus VWAP of $0.17), or 3.7% above the stock's current perch at $15.59. Should Vale SA (ADR) fail to topple the strike price by week's end, the most today's call buyers have risked is the initial premium paid.

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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