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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Morgan Stanley (NYSE:MS), QUALCOMM, Inc. (NASDAQ:QCOM), and Tesla Motors Inc (NASDAQ:TSLA). Here is a quick look at today's interesting activity in these options pits.
Morgan Stanley (NYSE:MS) is having quite a day, after this morning's stronger-than-forecast quarterly report prompted a bevy of bullish brokerage notes. In fact, the stock tagged a fresh two-year peak of $27.95 earlier in the session, but was last seen 4.6% higher to trade at $27.76. Not surprisingly, calls are flying off the shelves, trading at more than three times the average intraday volume. While there is notable option activity happening in the soon-to-expire front-month series, one group of speculators is targeting the September 29 call, as they eye a deeper move into multi-year high territory. Of the 1,504 contracts traded here, 77% have gone off at the ask price, and volume is outstripping open interest, hinting at buy-to-open activity. The volume-weighted average price (VWAP) for the calls is $0.71, meaning traders will profit with each step north of $29.71 (strike price plus the VWAP) MS takes through the close on Sept. 20. Should the stock fail to topple the strike price over the next nine weeks, the most the option players stand to lose is the initial premium paid. In the wake of this morning's report, implied volatility at this strike has dropped, and is now deflated relative to MS' 40-day historical (realized) volatility (26.7% vs. 31.9%). In other words, today's call buyers can rest easy knowing they picked up these bets at a bargain.
Although QUALCOMM, Inc. (NASDAQ:QCOM) is trading 2.8% lower today, calls are once again besting puts as the options of choice. By the numbers, around 71,000 calls have crossed the tape, compared to roughly 48,000 puts. With QCOM on tap to reveal its quarterly results after next Wednesday's close, some traders are using the stock's August 60 calls to bet on an earnings beat. The majority of the 9,996 contracts that have changed hands have done so on the ask side, and implied volatility has ticked 1.8 percentage points higher, indicating the initiation of new positions. Based on the VWAP of $2.81, the expectation is for QCOM to rally north of $62.81 by the close on Aug. 16, or 3.2% above its present price of $60.88. If recent history is any indication, these call players could be feeling the heat over the next several weeks. Despite matching bottom-line expectations during its last quarterly showing, the equity went on to surrender 5.4% and 6.2% in the respective day and week following its results. Meanwhile, with the scheduled event looming, QCOM's 30-day at-the-money implied volatility has soared 3.2 percentage points, or 13.9%, today to rest at 26.5%.
Tesla Motors Inc (NASDAQ:TSLA) has slowed its proverbial roll since tapping out at a record peak of $133.26 on Monday, with the shares off 10% to hover around $120.40. This short-term volatility has traders eyeing the front-month series of options, which will expire at tomorrow's close. One of the more active strikes is the July 117 put, where 4,323 contracts have traded for a VWAP of $1.87. The puts are crossing on both the ask and the bid side, and volume is exceeding open interest, suggesting a mix of buy- and sell-to-open activity, respectively. By purchasing the puts, speculators need TSLA to slide south of $115.13 (strike less VWAP) before the options expire, at which point they will begin to profit step-for-step with each tick lower the stock makes. By selling the puts, the traders expect the TSLA to remain north of the strike price through week's end, allowing the puts to expire worthless. In this best-case scenario, the put writers can retain the initial credit collected as their full potential reward.
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.