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Most Active Options: Intel Corp, Cisco Systems (CSCO), Netflix, Inc.

INTC, CSCO, and NFLX are seeing notable options trading activity today

by 7/15/2013 3:01 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 Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), and Netflix, Inc. (NASDAQ:NFLX). Here is a quick look at today's interesting activity in these options pits.

Intel Corporation (NASDAQ:INTC) is trading lower today, after Raymond James said the company's Xeon chip is a "medieval knight" compared to sector peer Applied Micro Circuits Corporation's (NASDAQ:AMCC) X-Gene, according to the Dow Jones Newswires. As a result, INTC has shed 0.3%, while AMCC has tacked on 14%. The negative price action hasn't deterred option traders, who continue to scoop up bullish bets on INTC. More than 17,000 October 26 calls have crossed the tape so far, 70% of which have done so on the ask side. Implied volatility is on the rise, and data from the International Securities Exchange (ISE) confirms buy-to-open activity. The out-of-the-money calls (OTM) are being purchased for a volume-weighted average price (VWAP) of $0.36. In other words, traders will begin to profit with each step north of $26.36 (strike plus VWAP) Intel takes through the close on Oct. 18. This breakeven mark represents expected upside of 10.6% to INTC's current price of $23.84. Meanwhile, the chip maker is slated to take its turn in the earnings confessional after the market closes on Wednesday. Wall Street is calling for a profit of 39 cents per share in INTC's second quarter.

Cisco Systems, Inc. (NASDAQ:CSCO) keeps chugging higher, and in today's session, the equity hit a three-year peak of $25.99. The stock is now sporting an impressive 32% year-to-date advance, with the lion's share of the gains coming on the heels of its well-received mid-May earnings report. With CSCO slated to step into the confessional after the market closes on Aug. 14, speculators are brushing off today's modest downturn, and, instead, are placing bets that history repeats itself. Of the roughly 4,300 August 28 calls that have changed hands today, 86% have traded at the ask price, and implied volatility is on the rise, indicating the initiation of new bullish positions. In order for these OTM calls to be profitable, CSCO must finish north of $28.18 -- which is the strike price plus the VWAP of $0.18 -- ahead of the closing bell on Aug. 16. The stock was last seen hovering around $25.94, and has not traded north of the previously mentioned breakeven level since December 2007. Should CSCO fail to topple the strike price, the most the call buyers stand to lose is the initial premium paid.

Netflix, Inc. (NASDAQ:NFLX) rallied to a fresh annual high of $259.85 this morning, in the wake of last week's upbeat analyst attention. The stock has since pared a portion of these gains, but was still trading up 0.5% at $258.45. There's more gas in NFLX's near-term tank, according to the group of traders picking up the July 255 calls. The majority of the 3,336 contracts traded have crossed on the ask side, implied volatility has surged 6.7 percentage points, and volume is outstripping open interest, making it safe to assume that a portion of the day's activity is of the buy-to-open kind. While the call is currently in the money, NFLX needs to tack on roughly 1% by Friday's close to topple $260.96 (strike plus VWAP of $5.96), thereby making the options profitable. My colleague Terri Stridsberg noted last Friday that, going forward, the stock could be poised to encounter some additional analyst-related tailwinds. Additionally, despite a 204% year-over-year advance, north of 14% of the stock's float is sold short, allowing the opportunity for a short-covering rally down the road.

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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