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 - 28.56), Pfizer Inc. (NYSE:PFE - 27.04), and JPMorgan Chase & Co. (NYSE:JPM - 48.09). Here is a quick look at today's interesting option activity in these options pits.
When it comes to FB, sometimes no news is the news. Option volume is quite low on the stock today -- relatively speaking -- with call volume at just 40% of what has usually traded by this point of the session. Put volume is even less than that, at 27% of typical levels. One strike worthy of mention is the April 23 put, where more than 2,000 contracts have traded, almost doubling existing open interest. A block of 2,000 contracts traded at the bid price of $0.24, representing a bet that FB will stay north of this strike through April options expiration. The most these put sellers can earn is the initial premium collected. The maximum potential loss, if they are assigned and forced to buy the shares, is $22.76 (strike less premium), should the stock fall all the way to zero.
Meanwhile, PFE appears to be seeing some call selling activity in the June series. More than 10,000 contracts have traded on the June 29 call, which came into today's session with open interest of under 1,800 contracts. All volume trading on this out-of-the-money strike changed hands at the bid price, suggesting the calls are being sold to open, for a volume-weighted average price of $0.33. This is likely a covered-call strategy, although it is slightly out of the ordinary, given the longer-term time span of the calls traded. PFE has four months in which to surpass the 29 strike, at which point the sellers would likely be called away, and required to deliver 100 shares of stock for every contract sold. Delta on this option is currently 21, however, giving it a roughly 1-in-4 chance of being in the money once expiration rolls around. PFE has not traded north of the $29 level since late 2004.
Finally JPM is in the red today after some unfavorable documents were unearthed as part of a lawsuit alleging mortgage-backed securities mismanagement. Put volume is heavy today, more than tripling expected intraday volume. In focus is the March 47 put, where nearly 28,000 contracts have traded, 22,590 of which crossed the tape as one block. This large block went off below the bid price at $0.60 per contract. Given that open interest was just 6,219 contracts heading into today's trading, this block was likely sold to open. The put sellers collected a net premium of $1.36 million (22,590 contracts times $0.60 times 100) in the hopes that JPM will stay north of the 47 strike through the closing bell on March 15, which is when these options expire. Today's pullback notwithstanding, JPM has been in an uptrend since mid-November and is mere pennies away from setting another new annual high.
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.