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Most Active Options: Netflix, Inc., Sprint Nextel (S), Cisco Systems

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

by 7/2/2013 3:16 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 Netflix, Inc. (NASDAQ:NFLX), Sprint Nextel Corporation (NYSE:S), and Cisco Systems, Inc. (NASDAQ:CSCO). Here is a quick look at today's interesting activity in these options pits.

Netflix, Inc. (NASDAQ:NFLX) has had an impressive run on the charts over the past 52 weeks, with the stock up more than 226%. The positive price action has brought the stock north of $220, prompting some speculators to target this level as a near-term layer of support. A number of the 2,143 weekly 7/5 220-strike puts that have changed hands have done so at the bid price, and volume is outstripping open interest, pointing to sell-to-open activity. Ideally, NFLX will finish the week north of $220 -- the equity is currently lingering near $222.65 -- allowing the puts to expire worthless, and the traders to retain the initial net credit collected. According to Trade-Alert, the volume-weighted average price (VWAP) for the puts is $2.32. From a wider sentiment standpoint, traders have been using puts in the traditional sense in recent weeks. Per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 1.05 ranks higher than 86% of similar readings taken in the past year. The stock could find an options-related foothold, as these bearish bets begin to unwind.

Sprint Nextel Corporation (NYSE:S) has re-established its footing atop the $7 mark over the past few sessions; however, one particular set of traders is betting on the stock to fall back below this mark over the next two weeks. Of the 2,932 weekly 7/12 7-strike puts that have traded, 70% have gone off at the ask price, implied volatility was last seen 6.8 percentage points higher, and volume is exceeding current levels of open interest, pointing to buy-to-open activity. The puts are going off for a VWAP of $0.05, meaning S must land below $6.95 (strike price less VWAP) by next Friday's close in order for the traders to turn a profit. With S currently trading at $7.11, this would require a drop of roughly 2.3%. On the fundamental front, the company is facing a $300-million lawsuit in New York, on allegations S failed to pony up $100 million in sales tax. Additionally, the stock will be replaced by Nielsen Hldg NV (NYSE:NLSN) on the S&P 500 Index (SPX) effective after the closing bell on Monday, July 8.

Cisco Systems, Inc. (NASDAQ:CSCO) has been waffling in the $23 to $25 region since mid-May, but one bunch of bulls in today's session is eyeing a breakthrough of this range over the next several months. North of 12,100 September 26 calls have crossed the tape today, mostly at the ask price. With implied volatility on the rise, and only 3,227 contracts currently residing at this strike, it seems safe to assume that some of today's activity is of the buy-to-open variety. The VWAP for the out-of-the-money calls is $0.54, making breakeven $26.54, or 9.2% above CSCO's present price of $24.31. Outside of the options pits, sentiment toward CSCO is more upbeat. Among covering analysts, 22 out of 30 maintain a "buy" or better recommendation toward Cisco, while short interest accounts for a low 1.1% of the stock's available float.

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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