Stocks quoted in this article:
Among the 20 equities seeing the most-active options volume of late, three names of note this light trading day are General Electric Company (NYSE:GE - 21.05), Exxon Mobil Corporation (NYSE:XOM - 87.21), and Caterpillar Inc. (NYSE:CAT - 85.01). Here is a brief look at some interesting option activity we are seeing in these options pits this afternoon.
GE is seeing some activity at the at-the-money November 21-strike call, which expires at the end of this week. Although open interest exceeds volume by a healthy margin, implied volatility has ticked nearly three percentage points higher, so some of today's activity could be the work of short-term option speculators buying the positions to open. If so, the traders are wagering on modest upside for GE this week. The short-term trend in the GE options pits has been toward calls: the 10-day call/put volume ratio measuring activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 3.74, higher than 86% of the past year's readings.
Despite news that it may suffer a 20% increase in costs on a project in Papua New Guinea -- amounting to $3.3 billion -- XOM is unchanged today. In the options pits, the November 87.50-strike call has seen volume of 4,700 contracts on open interest of 2,900. The bulk of the volume has changed hands at or near the ask price, suggesting speculators are targeting upside in the stock between now and Friday's close. Traders are paying an average premium of $0.64 per contract, making the breakeven price $88.14 at expiration.
Equipment manufacturer CAT is hovering around breakeven today after being downgraded at JPMorgan this morning. The stock's February 80-strike put is getting some attention, as almost 4,600 contracts have traded on open interest of roughly half of that. The majority of the trades have gone off at the ask price, indicating these bearish bets are being bought to open. This strategy bets that CAT will be trading below $76.80 (strike less average premium paid) at February options expiration. That is a drop of roughly 9.6% from current levels.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past two weeks. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.