Stocks quoted in this article:
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. Three names of notable interest this afternoon are Zynga Inc (NASDAQ:ZNGA), Microsoft Corporation (NASDAQ:MSFT), and Tesla Motors Inc (NASDAQ:TSLA).
MSFT regained a foothold north of the $33 mark last Friday, and today's speculators appear to be selling to open weekly 10/4 33-strike puts in hopes this level acts as short-term support. Elsewhere, calls and puts are trading in parity in TSLA's options pits, despite this morning's downgrade. Meanwhile, here is a quick look at the interesting activity in ZNGA's options pits.
Zynga Inc is following the broad-market trend lower, with the stock down 1.2% at last check to trade at $3.80. Nevertheless, call volume is accelerated, trading at more than two times the average intraday pace. As such, ZNGA's 30-day, at-the-money implied volatility (IV) has soared 6.9 percentage points, or 10.1%, to 74.8% -- its loftiest perch since July 25.
Today's speculators are upping the bullish ante -- and extending their time frame -- relative to yesterday's option traders by scooping up the October 4.50 calls for a volume-weighted average price (VWAP) of $0.08. Almost all of the 11,534 contracts traded here -- including several mid- and large-sized blocks -- have done so on the ask side, implied volatility has soared, and volume is easily outstripping open interest. Summing it all up, it appears a fresh batch of bullish positions is being initiated.
By purchasing the calls to open, the speculators believe ZNGA will muscle its way above $4.50 by the close on Oct. 18. More specifically, the traders will begin to profit with each step beyond $4.58, which is the strike plus the VWAP, Zynga Inc (NASDAQ:ZNGA) takes over the next several weeks. Considering the security hasn't traded north of $4.50 since July 2012, delta for the call is docked at 0.19, or 19%, suggesting a less than 1-in-5 chance the option will find its way into the money ahead of expiration.
Should the equity fail to topple the strike price within the call's lifetime, the most the traders stand to lose is the initial premium paid. With IV at the October 4.50 call inflated relative to ZNGA's 20-day historical (realized) volatility (77.7% vs. 44.3%), it appears that speculators were willing to pay a bit more for their bullish outlook.