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 Ford Motor Company (NYSE:F - 13.23), Cisco Systems, Inc. (NASDAQ:CSCO - 20.12), and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - 34.80). Here is a quick look at today's interesting option activity in these options pits.
F bulls are taking a long-term approach today and executing a bull call spread using the January 2015 15-strike and 20-strike calls. Specifically, a block of 4,232 of the lower-strike LEAPS were apparently purchased at the ask price of $1.53, while the same number of 20-strike calls were sold at the bid price of $0.45. The net debit of $1.08 is the most this spread buyer can lose if F is trading below $15 when these options expire in two years. The maximum profit, meanwhile, is $3.92 (difference in strikes less premium paid), and is achieved if F is north of $20 when the options expire. Breakeven on this bullish debit spread is $16.08, or the long strike plus the premium paid. F shares have rallied 50% from their annual low of $8.82 reached on Aug. 2, and tagged a new annual high of $13.69 just last week. What's more -- in terms of relative strength -- the shares have outperformed the S&P 500 Index (SPX) by more than 31 percentage points during the last three months.
Options trading volume is running at an above-average pace in CSCO today, as total call volume is 20% greater than is what's usually expected, while total put volume is two times heavier than average. Attracting notable attention is the January 2013 20-strike put, where nearly 12,300 contracts have traded. Although current open interest of 67,674 dwarfs this volume, nearly 70% of the 12,300 contracts have traded at the ask price, and implied volatility has edged higher, suggesting some of the bearish positions are being purchased to open. These short-term calls are a bet that CSCO will move lower between now and next Friday's close, when the options expire. The volume-weighted average price (VWAP) for this trade was $0.18, making breakeven $19.82 (strike less premium paid), or 1.5% below the stock's current price.
With its ex-dividend date set for this Friday, FCX is attracting some speculative attention. Most active is the May 33 call, where 4,560 contracts have changed hands, narrowly edging out existing open interest. Nearly all of this volume came across the tape as one block of 4,500 contracts, which traded at the ask price of $3.40 per contract. These call buyers are looking for upside in FCX through the next several months; breakeven at May expiration is $36.40 (strike plus premium paid), and the maximum potential loss is 100% of the premium paid, should FCX be trading south of $33 when the options expire. Calls have been the option variety of choice of late; in fact, the 50-day call/put volume ratio measuring buy-to-open activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 2.95, which is an annual high. In other words, the number of calls being bought to open has nearly tripled the number of puts during the past 10 weeks, suggesting an annual peak in demand for long calls.
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.