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 - 13.84), Intel Corporation (NASDAQ:INTC - 21.71), and Verizon Communications Inc. (NYSE:VZ - 43.21). Here is a quick look at today's interesting option activity in these options pits.
After doubling its quarterly dividend to a dime per share (the highest in seven years), F has swiftly advanced 2.5% today, touching a new 17-month high of $13.94 in the process. The February 15 call is subsequently attracting attention. Nearly 22,000 contracts have traded, compared to open interest of under 5,200. What's more, more than 90% of this volume has traded at or near the ask price, and implied volatility has edged higher. In other words, at least some of these out-of-the-money calls are likely being bought to open by bullish traders gambling on continued upside in the shares. Based on today's volume-weighted average price (VWAP) of $0.11, breakeven at expiration for this position is $15.11 (strike plus premium), which is about 9% above current levels and in territory not visited by F since May 2011. Potential gains are unlimited beyond this point, while losses are contained to 100% of the initial debit paid.
INTC has also muscled higher today, as it continues to rebound from its late-November nadir. In the last seven weeks -- since hitting an annual low of $19.23 on Nov. 21 -- the shares have tacked on close to 13%. This price action has spurred some bullish speculation among option buyers. In the past 10 days on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the number of calls bought to open has doubled the number of puts. As recently as Dec. 24, the call/put volume ratio stood much closer to parity, at 1.27. Today, however, put traders are holding the reins, with the January 2013 21-strike put in focus. More than 58,000 contracts have traded at this strike, with four-fifths of the trades changing hands at the ask price. Implied volatility is up more than 2 percentage points, and the ISE indicates that large blocks have been bought to open. The largest trade was a block of 18,000 contracts that crossed at the ask price of $0.20 per contract. The strategy bets on short-term downside in INTC, as the semiconductor stock needs to be trading south of $19.80 (strike minus premium paid) by next Friday's close in order for these puts to be profitable at expiration.
Option players are taking a longer-term approach to VZ, as the July 44 call is the most active option trading in the telecomm name today. All of the nearly 1,700 calls trading have traded at the ask price, and exchange information indicates some buy-to-open orders. The call purchase banks on modest upside in VZ shares over the next six months, as the breakeven price is $45.43 -- the strike price plus the VWAP of $1.43. This is an advance of 5.1% from the current price. The option's delta is currently 0.39, or 39%, suggesting a 39% shot at being in the money by expiration. This also means the option will increase in value by $0.39 for every $1 gain in the underlying stock.
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.