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Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB - 28.12), Morgan Stanley (NYSE:MS - 23.28), and Citigroup Inc. (NYSE:C - 44.76). Here is a quick look at today's interesting activity in these options pits.
FB is up more than 2% today, as Wall Street digests this afternoon's big reveal by the social networking site. One group of option players is betting on this momentum to continue through tomorrow's close, and are scooping up the stock's weekly 3/8 28-strike calls. More than 20,000 contracts have traded here, a healthy portion of which have crossed at the ask price, hinting at buyer-driven activity. Plus, implied volatility has jumped 2.4 percentage points, and data from the International Securities Exchange (ISE) indicates a number of positions were bought to open. The volume-weighted average price (VWAP) for the in-the-money calls is $0.46, meaning FB must conquer the $28.46 mark (strike price plus VWAP) by week's end (when the near-term options expire) in order for the bets to be profitable. Delta for the call is currently perched at 0.51, or 51%. In other words, there is a slightly more than 1-in-2 chance the option will expire in profitable territory.
Ahead of this afternoon's release of the results from the Federal Reserve's latest round of stress tests, shares of MS are trading about 1.5% higher. A number of option traders seem to be spooked by the looming report, and have focused their attention toward MS' weekly 3/8 23-strike put. The majority of the 1,857 contracts traded here have crossed at the ask price, implied volatility was last seen 5.8 percentage points higher, and volume is outstripping open interest, pointing to the initiation of new bearish positions. Breakeven for these out-of-the-money puts is $22.81 (strike less VWAP of $0.19), or 2% below current levels. Puts have been popular on MS in recent weeks, though, as evidenced by data from the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the stock's 10-day put/call volume ratio of 1.15 ranks just 4 percentage points below a 52-week peak, suggesting puts have been bought to open over calls at a near annual-high clip. For a stock that's sporting a 21% year-to-date advance, this uptick in put volume could simply represent shareholders protecting profits against a potential pullback.
C is also enjoying some pre-Fed positive price action in today's session, with the stock tagging a fresh 52-week peak of $44.97 in afternoon trading. One speculator doesn't seem too worried about C's upward momentum, and bought to open (per Trade-Alert) a block of 4,000 March 45.50 calls above the ask price for $0.53 per contract. Based on this purchase price, the speculator will begin to profit with each step north of $50.03 (strike plus net debit) C takes through next Friday's close, when front-month options expire. This breakeven mark represents territory not charted by C since January 2011. Should the stock fail to topple this overhead level, the most today's call buyer has risked is the initial premium paid.
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.