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Most Active Options Update: Facebook, Constellation Brands, Microsoft

FB, STZ, and MSFT are seeing notable options trading activity today

by 2/21/2013 2:38 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 Facebook Inc (NASDAQ:FB - 27.32), Constellation Brands, Inc. (NYSE:STZ - 42.23), and Microsoft Corporation (NASDAQ:MSFT - 27.48). Here is a quick look at today's interesting activity in these options pits.

Facebook Inc is once again among the most active underlying securities in the options pits today, and weekly options that expire at tomorrow's close are taking center stage. The 2/22 28-strike call and 2/22 27.50-strike put have seen, respectively, volume of almost 15,100 and 10,800 contracts, which is trumping existing open interest at both strikes. But perhaps more interesting is one block that traded at the April 30 call strike. In late-morning action, 4,050 contracts changed hands in one fell swoop below the bid price at $0.62 per contract. This block may have been sold to open on the belief that FB will not muscle above the 30 strike before April 19, when these options expire. With the shares off more than 4% today, delta on this call has dropped from 0.37 at last night's close to 0.27, implying a roughly 1-in-4 chance these calls will be in the money by the time they expire. This reduced hope is likely good news for anyone who sold the options to open in hopes of retaining the credit collected as profit.

As the battle drags on between the U.S. Justice Department and Anheuser-Busch InBev NV (ADR) (NYSE:BUD), Constellation Brands has stayed in the news and remains popular among options traders. Taking today's top slot among the most active STZ strikes is the March 35 put, where nearly 13,500 contracts have traded, mostly at the bid price. An even 10,000 of these contracts crossed the tape as one block that went off at the bid price of $0.40 per contract. It's possible an investor is closing out of long puts opened on Feb. 14 for a volume-weighted average price (VWAP) of $0.50 (in other words, exiting at a 10-cent loss). According to Trade-Alert volume was notable at this strike last Thursday, and open interest expanded by nearly 22,000 contracts. This was the same day STZ spiked 37% higher, which may have inspired some plucky speculators to bet against the stock's short-term outlook. In the subsequent sessions, however, STZ has held steady around the $42 level.

Finally, Microsoft has earned some fans among short-term bears, bringing the March 27 put into focus. More than 8,000 contracts have traded on this near-the-money option today and 89% of the volume has crossed at the ask price. With implied volatility slightly elevated, it is likely some of today's orders have been bought to open. The breakeven price for today's trades -- at expiration -- is $26.73 (the strike less the VWAP of $0.27), or 2.7% south of current levels. Puts have actually not been a popular choice for option buyers of late; in the past 50 trading sessions, nearly three calls have been bought on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) for every put. What's more, the resultant call/put volume ratio of 2.86 ranks higher than 96% of the past year's worth of readings, suggesting option traders have rarely been more call-heavy in the last 12 months.

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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