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 Tesla Motors Inc (NASDAQ:TSLA), Citigroup Inc (NYSE:C), and Microsoft Corporation (NASDAQ:MSFT). Here is a quick look at today's interesting activity in these options pits.
Powered by a price-target hike from Jefferies, Tesla Motors Inc has spiked 7.5% to its current perch of $115.38, hitting a new all-time peak of $116.20 along the way. Today's move brings the stock's year-to-date gain to a whopping 240%. Option players have come out in force on both sides of the trading fence as a result. More than 50,000 calls have changed hands (a 38% mark-up to typical volume levels), while put volume is running 13% hotter than normal, as 36,000 contracts have crossed the tape. Currently, the most active strike is the out-of-the-money July 130 call, where more than 5,700 contracts have traded, the majority of which crossed at the ask price. Volume exceeds open interest, and implied volatility has sharply advanced, suggesting these are bullish bets being purchased to open. The TSLA bulls buying these calls are hoping the stock will continue its impressive uptrend through the middle of the month, and overtake the breakeven price of $131.73, or the strike plus the volume-weighted average price (VWAP) of $1.73.
Citigroup Inc is also participating in the broad-market rally, up 1.6% to $48.72. This morning, the bank said it would pay mortgage giant Fannie Mae $968 million to resolve potential mortgage repurchase claims. Activity in C's options pits is relatively sleepy -- at 57% of typical levels -- but the July 49 put has received some attention, with more than 4,000 contracts trading, nearly all at the ask price. Given the increase in implied volatility, these are likely being purchased to open for a VWAP of $1.24. The breakeven price at expiration, then, is $47.76 (strike less the VWAP). With the stock moving higher today, delta on the put option has dropped from negative 0.61, or 61%, at Friday's close to negative 0.55, or 55%. In simpler terms, the option has a slightly better than 1-in-2 shot at being in the money on July 19, when the option expires.
Overall option trading volume is underwhelming in Microsoft Corporation as well -- 46% of what's normal -- but the weekly 7/5 34-strike put has attracted likely buyers. Nearly 6,500 contracts have traded (versus open interest of fewer than 1,000), more than 80% have gone off at the ask price, and implied volatility has risen nearly 2 percentage points. Given that these puts now have fewer than three full trading days before expiration (due to Thursday's holiday and Wednesday's abbreviated session), they are relatively aggressive bets with the stock perched at $34.46. The weekly options traded for a VWAP of $0.14, meaning breakeven at Friday's close is $33.86, or a 1.7% drop from current levels. Today, MSFT is underperforming the broad market, down nearly 0.4%.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.