Stocks quoted in this article:
Of the 20 equities with the heaviest options volume in recent sessions, three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB - 31.31), Nokia Corporation (ADR) (NYSE:NOK - 4.10), and Dell Inc. (NASDAQ:DELL - 13.31). Here is a quick look at today's interesting option activity in these options pits.
Ahead of its earnings report tonight, FB currently ranks fifth on today's list of the most active securities among options players. Put volume is more than double what's typically expected, and call volume is outpacing average intraday levels by 33%. The most active strike is the March 31 put, where more than 15,500 contracts have changed hands, easily trumping existing open interest of 4,782. Although the majority of the volume has traded between the bid and the ask price, implied volatility has ticked higher, suggesting some of the trades may have been purchased to open. Speculators buying these puts for the volume-weighted average price of $2.05 need FB to drop south of $28.95 (strike less premium paid) by the time these puts expire in order for the contracts to be profitable at expiration. Of course, the put buyers can choose to exit the position at any time between now and then. The delta of this option stands at negative 44, meaning the option has a nearly 1-in-2 chance of being in the money when the options cease trading in 44 days.
Two large blocks traded on NOK earlier today -- a block of 14,725 January 2014 2.5-strike calls traded at the ask price of $1.83, while a block of 12,985 January 2014 1.5-strike puts changed hands at the bid price of $0.07. Open interest exceeds volume on both of these long-term options, but if these are new positions, it could be a split-strike risk reversal (also known as a synthetic long stock). In other words, an investor is buying calls and selling puts to simulate the returns of a traditional long stock play. NOK has seen some interesting option activity of late -- on Monday, a trader executed a short strangle, which is a bet on lower volatility. On the charts, NOK is testing support today at its 40-day moving average, which has not been breached on a closing basis since mid-November.
Finally, option traders have descended on DELL amid new signs that a deal to take the company private is in the cards. Most active currently is the February 13 call, where more than 12,000 contracts have traded, 77% of which crossed at the ask price. Data from the International Securities Exchange (ISE) suggests this volume is a mix of buying and selling, as investors likely attempt to hedge ahead of any official announcement. Today, sources reported that company founder Michael Dell is getting his financial ducks in a row in hopes of assuming majority control of the PC maker.
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.