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Most Active Options Update: Ford Motor (F), QUALCOMM, Freeport-McMoRan

F, QCOM, and FCX are seeing notable options trading activity today

by 3/20/2013 2:14 PM
Stocks quoted in this article:

Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Ford Motor Company (NYSE:F - 13.28), QUALCOMM, Inc. (NASDAQ:QCOM - 65.81), and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - 33.26). Here is a quick look at today's interesting activity in these options pits.

Ford Motor has been in a downtrend lately, with the stock trading more than 7% below its annual high of $14.30, which was tagged on Jan. 15. Against this backdrop, one speculator in today's session is betting on the stock to continue to struggle over the next few months. Around 11:15 a.m. ET on the NASDAQ OMX PHLX (PHLX), one block of 1,467 contracts crossed at F's July 14 call for the bid price of $0.38, pointing to seller-driven activity. What's more, Trade-Alert indicated that new positions were, indeed, being opened here today. By writing these out-of-the-money calls, traders expect F to remain below the $14 mark through July expiration. In this best-case scenario, the options will expire worthless, and the trader can retain the initial premium collected, which also represents the full potential profit on the play. The options market seems fairly confident the position won't land in the money by expiration, with delta for the call currently perched at 0.35, or 35%.

Things are a bit more optimistic in QCOM's options pits today, where around 27,000 calls have crossed the tape, representing an 82% mark-up to the average intraday volume. By contrast, fewer than 7,800 puts have changed hands. QUALCOMM's June 70 call is one of the day's more active strikes. A healthy portion of the 2,126 contracts traded here have crossed at the ask price, and only 193 contracts make up open interest, suggesting that a portion of today's activity is of the buy-to-open variety. The out-of-the-money calls are being purchased for a volume-weighted average price (VWAP) of $1.09, meaning traders will begin to profit with each step north of $71.09 (strike plus the VWAP) QCOM takes through the close on June 21. Expanding the scope reveals that today's trend toward calls is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and PHLX, the stock's 10-day call/put volume ratio of 3.85 ranks higher than 88% of other such readings. Simply stated, calls have been bought to open over puts with more rapidity just 12% of the time within the past year.

This bullishly skewed bias is prevalent in FCX's options arena as well, where call volume has outpaced put volume by a margin of more than 2-to-1. Freeport-McMoRan's May 36 call is the most active strike thus far, where the majority of the 1,618 contracts that have changed hands have done so at the ask price. Data from the ISE confirms that a number of the positions have been bought to open, indicating one group of speculators is betting on a more than 8% pop for the stock by the close on May 17. Specifically, breakeven for the out-of-the-money calls is $36.42 (strike plus VWAP of $0.42). Delta for the call is docked at 0.22, or 22%, implying a roughly 1-in-5 chance the position will expire in profitable territory. Should the stock fail to muscle above the strike price over the next two months, though, the most today's traders have risked is the initial premium paid.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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