Stocks quoted in this article:
The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are Facebook Inc (NASDAQ:FB), Bank of America Corp (NYSE:BAC), and Micron Technology, Inc. (NASDAQ:MU).
One Bank of America Corp trader is expecting a big swing in the stock over the next few months, and built a long straddle with January 2014 14-strike calls and puts. Meanwhile, Micron Technology, Inc. is bucking the broad-market trend lower, with the equity up more than 3% at last check. As such, calls are outpacing puts in MU's options pits by a more than 2-to-1 margin. Elsewhere, here's a closer look at how one cautiously optimistic Facebook Inc (FB) speculator used calls to create a moderately bullish spread.
Facebook Inc (FB) is in focus today, following this morning's initial public offering of sector peer Twitter Inc (NYSE:TWTR). In FB's options pits, it appears the stock was targeted for a long call spread in the December series of options. Several large- and mid-sized blocks of December 55 calls have changed hands at or near the ask price, while symmetrical blocks of December 60 calls simultaneously changed hands at or around the bid price. Implied volatility has ticked higher at these strikes, and data from the International Securities Exchange (ISE) confirms buy- and sell-to-open activity, respectively.
The volume-weighted average price (VWAP) for the December 55 calls is $0.84, while the December 60 calls have gone off at a VWAP of $0.31, resulting in a net debit of $0.53 for the two-legged spread. By initiating the strategy, the speculator will begin to profit with each step north of $55.53 -- which is the bought strike plus the initial cash outlay -- FB takes over the next six-plus weeks. However, she does not want FB to soar too far above the sold call strike; otherwise, she could regret not playing the long call solo.
Meanwhile, her maximum profit potential for the spread is $4.47, which is the difference between the two strikes minus the net debit, and will be realized if FB finishes at or above $60 at December expiration. However, by sacrificing a bit of the reward by writing the call, she has also limited her risk to the net debit of $0.53, should FB finish at or below $55 when the options expire on Dec. 20.
On the charts, FB has been a technical standout, with the shares up nearly 135% year-over-year to trade at $48.00. As a point of reference, the broader Nasdaq Composite has tacked on about 32% in that same time frame.