Stocks quoted in this article:
Of the 20 equities posting the heaviest options volume in recent sessions, three names of notable interest this afternoon Facebook Inc (NASDAQ:FB - 27.29), Sirius XM Radio Inc (NASDAQ:SIRI - 2.98), and Citigroup Inc. (NYSE:C - 39.87). Here is a quick look at today's interesting option activity in these options pits.
As FB continues to mosey its way up the charts, short-term option buyers are trying to turn a quick profit. Nearly 13,000 contracts have traded on the December 26.50 call, which came into the session with open interest of just 2,000. Roughly 60% of the volume at this strike has traded off the ask price, signifying buy-to-open activity. Given the volume-weighted average price (VWAP) of $0.88, breakeven on this strategy at expiration would be $27.38. In other words, FB needs to be trading north of this level at Friday's close in order for today's call buyers to be profitable.
SIRI has reached a new four-year high of $3.00 today, and call buyers are taking the opportunity to hit the exits. A block of nearly 37,000 contracts crossed the tape at the December 3 call, and traded between the bid and the ask price, at $0.05 per contract. Based on reports from major option exchanges, this move likely closes positions that were opened last Thursday. While the VWAP paid for these calls was 3.1 cents, some traders were able to jump into the trade for as little as $0.02 per contract. On average, the trade yielded a profit of roughly 60% (from the purchase price of $0.031 to the sell price of $0.05) in under a week, and these aggressive option bulls have Goldman Sachs to thank. The firm started the stock with a "buy" rating this morning, lifting the shares and allowing these out-of-the-money options to enter profitable territory ahead of expiration this Friday.
Also hitting a new annual high today is C, which has moderately advanced amid a host of upgrades for the banking sector at Meredith Whitney Advisory Group. Against this backdrop, C has seen heavy volume at its January 2013 40 call and January 2014 50 call. This includes blocks of 26,114 contracts at each strike that traded simultaneously within the first hour of today's trading. It looks as though investors are closing the shorter-term options, as C approaches the strike, in favor of the longer-term, higher-strike bets. Selling the 50-strike calls for $1.72 apiece -- possibly as part of a covered call strategy -- allows for more upside in the shares over the course of the next 13 months. If the call sellers hold these positions all the way until expiration, they will keep the entire premium collected as long as C is still trading south of $50 when the options expire. The current 12-month price target among analysts is just $43.60, representing upside of up 9.2% from the stock's new peak of $39.94 tagged earlier today.
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.