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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Cisco Systems, Inc. (NASDAQ:CSCO - 21.60), Intel Corporation (NASDAQ:INTC - 21.56), and Merck & Co., Inc. (NYSE:MRK - 44.10). Here is a quick look at today's interesting activity in these options pits.
Cisco Systems has bounced back from yesterday's mild pullback, and today's option traders are eyeing a longer-term uptrend. The most active strike of the day is CSCO's May 25 call, where all of the 2,583 contracts have crossed at the ask price. Implied volatility was last seen higher, and data from the International Securities Exchange (ISE) indicates the option is seeing some buy-to-open activity. The deep out-of-the-money calls are being purchased for a volume-weighted average price (VWAP) of $0.04, meaning traders will reap a reward with each stride north of $25.04 (strike plus VWAP) CSCO takes through May expiration. The options market isn't too confident these calls will be profitable by the close on May 17. Delta for the call is currently perched at 0.04, suggesting a slim 4% chance the position will move into the money. Today's activity diverges from the withstanding trend in the options pits, per the stock's Schaeffer's put/call open interest ratio (SOIR). Since Feb. 22, Cisco's SOIR has risen to 0.77 from 0.70, as near-term put open interest grew 30%. What's more, this ratio ranks in the 90th percentile of its annual range, indicating short-term speculators have rarely been more put-heavy toward the equity.
Calls are also popular on Intel today; however, traders are placing their bullish bets with a shorter turnaround time in mind. The stock's weekly 3/22 22-strike call has seen almost 1,400 contracts change hands, 83% of which have traded at the ask price. There are currently no open positions here, so it's safe to assume that some of today's activity is of the buy-to-open variety. Breakeven for these out-of-the-money calls is $22.11 (strike plus VWAP of $0.11), or 2.6% above present trading levels. Delta is docked at 0.21, or 21%, implying a roughly 1-in-5 chance the position will be profitable by next Friday's close, when the weekly options expire. Should INTC fail to muscle north of the strike price, the most today's call buyers stand to lose is the initial premium paid. On the charts, Intel Corporation has bounced 7.3% from its Feb. 22 low of $20.10.
In Merck's options pits today, traders are turning their attention to the equity's March 44 call. The majority of the 3,800 contracts that have traded here have crossed at the ask price, and volume is outstripping open interest, pointing to the initiation of new positions. The VWAP for the in-the-money calls is $0.16, making breakeven $44.16. From a wider sentiment standpoint, option players have been scooping up puts at an accelerated clip. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), MRK's 10-day put/call volume ratio of 0.58 ranks higher than 87% of other such readings taken in the past year. In other words, puts have been bought to open over calls with more rapidity just 13% of the time within the last 12 months. In today's session, the Dow component is sitting out on the blue-chip barometer's record-setting advance, and was more than 1% lower at last check. The U.S. Food and Drug Administration (FDA) announced today that it will be looking into unconfirmed reports that a popular category of diabetes medication could be linked to inflammation and pre-cancerous cell formation of the pancreas. Merck & Co's Januvia is included in this class of drugs.
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.