Stocks quoted in this article:
Three of today's most actively traded names among options speculators are Nokia Corporation (ADR) (NYSE:NOK - 3.79), Cisco Systems, Inc. (NASDAQ:CSCO - 19.20), and Intel Corporation (NASDAQ:INTC - 20.17). Here is a quick look at some interesting trades we are seeing in these option pits today.
NOK speculators are looking long term today, as the January 2014 5 put is seeing lots of attention. Almost 8,700 contracts have changed hands, and the price action has been evenly split between the bid and ask prices (as well as in between). Implied volatility has moved notably higher, however, suggesting that at least some of the activity is the result of buy-to-open orders. The average premium price of $1.97 per contract conveys the belief that NOK will shoot up to $6.97 (strike plus debit paid) by the time these options expire in 13 months. So far in 2012, NOK has actually dropped more than 21%, despite a 42% rally since mid-November. Some of this volume may also be a covered-call strategy, where the NOK call sellers expect the 5 strike to act as a ceiling for the foreseeable future.
Meanwhile, some call buyers in CSCO appear to be heading for the exits. The January 2013 20 call is active today, with almost 6,400 contracts trading, the lion's share of which have changed hands at the bid price. Data from the International Securities Exchange (ISE) shows that some of these calls are being sold to close, as investors take leave of a bullish position. CSCO calls have been popular of late, as the 10-day call/put volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 4.20, up from the 20-day ratio of 2.19. This means during the past two weeks, 4.2 calls have been bought to open for every put. Speaking at the company's annual analyst day today, Chief Executive John Chambers projected doubling the networking heavyweight's software revenue within five years, and plans to step up mergers-and-acquisitions activity. The Street has not been wowed with these projections, as the stock is trading more than 1% lower in early afternoon action.
Lastly, the most active INTC strike so far today is the January 2013 22.5 call, where more than 8,000 contracts have traded. More than 80% of this volume has gone off at or near the bid price, and ISE data suggests these are being sold to open. The call-selling strategy suggests the belief that INTC will be unable to surmount the $22.50 level by the close on Jan. 18. At this point, the calls expire worthless, and traders who sold them will keep the initial premium collected as profit. Today, these calls have traded at a volume-weighted average price of $0.11. The sold strike is currently 11.6% overhead, and INTC has underperformed the S&P 500 Index (SPX) by more than 12 percentage points during the last three points. Continued weakness -- or even consolidation -- should keep the call sellers in the money through January expiration.
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.