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Most Active Options Update: Microsoft, Yahoo!, and JPMorgan Chase

MSFT, YHOO, and JPM are seeing active trading in the options pits today

by 11/20/2012 12:58 PM
Stocks quoted in this article:

Three of today's most actively traded names among options players are Microsoft Corporation (NASDAQ:MSFT - 26.65), Yahoo! Inc. (NASDAQ:YHOO - 18.38), and JPMorgan Chase & Co. (NYSE:JPM - 41.11). Here is a brief look at some interesting activity we are seeing in these option pits today.

Among MSFT options, the January 29 call is in focus, with roughly 5,000 contracts changing hands. Three-quarters of this volume has traded at the ask price, and implied volatility has pressed higher, suggesting some of the activity may be the work of long call buyers targeting a relatively aggressive move in the shares. Based on the average premium paid of $0.18, breakeven at expiration is $29.18, or 9.5% above current levels. It wasn't so long ago that MSFT shares were trading near this level, however; the stock inched above the $30 mark on Election Day and has taken a subsequent tumble.

After inching up to another new annual high today, YHOO has settled back around breakeven. Option watchers are anticipating very limited upside during the next few days, however, and are evidently selling to open the weekly 18.50 calls, which are out of the money by just 12 cents. Currently, 6,800 contracts have changed hands, compared to open interest of roughly 1,500, and the large majority of the trades (85%) have executed at the bid price. Assuming YHOO is trading south of $18.50 at Friday's closing bell, those who sold the options will keep the modest premium collected as profit as the calls expire worthless. Today's activity is a change of pace in the options pits; the 50-day buy-to-open call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 4.80, meaning calls have been bought to open at nearly quintuple the pace of puts. What's more, this ratio is just two percentage points shy of an annual peak.

The Street is reacting positively to news that JPM appointed a new CFO, sending the shares moderately higher. Some options players are reacting by scooping up short-term bullish bets. The weekly 42 calls have posted volume of 5,400 on open interest of just under 695 contracts. Nearly all of the volume has traded at the ask price, meaning these calls are being bought to open -- for an average premium of $0.04 apiece. Breakeven at Friday's expiration, therefore, is $42.04, or 2.3% above current levels. Overcall call volume in JPM (on an intraday basis) is currently running about 45% higher than usual.

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.

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