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Option Clips: Amazon.com, Inc., Zynga Inc, and Broadcom Corporation

Reviewing notable options activity on Amazon.com, Inc., Zynga Inc, and Broadcom Corporation

by 6/5/2014 2:20 PM
Stocks quoted in this article:

Three names seeing notable option activity today amid developing news and/or unusual price action are online marketplace Amazon.com, Inc. (NASDAQ:AMZN), social gaming issue Zynga Inc (NASDAQ:ZNGA), and semiconductor concern Broadcom Corporation (NASDAQ:BRCM). Here's a look at how today's option traders have been placing their bets on these three names.

  • Amazon.com, Inc. (NASDAQ:AMZN) has rallied 6.3% to $326.29, after the company hinted at a new product set to debut on June 18. Speculation has ramped up on what the e-tailer might unveil, including a new smartphone with three-dimensional display. As a result, demand for AMZN's short-term options has skyrocketed today, as the stock's 30-day at-the-money (ATM) implied volatility (IV) is up 17.9% at 29.4%. Calls are particularly in favor, trading at five times the average intraday rate, and more than doubling AMZN puts. The four most active strikes expire at tomorrow's closing bell, with buy-to-open activity detected at the weekly 6/6 315-, 320-, 325-, and 330-strike calls -- the first three of which are in the money, at last check. By purchasing the calls to open, the buyers expect AMZN shares to end the week north of the respective strikes tomorrow. Meanwhile, slightly longer-term bulls have honed in on the June 320 and 330 calls, amid hopes for AMZN to settle atop the strikes by the close on Friday, June 20 -- when front-month options expire, and two days after the aforementioned launch event.

  • Zynga Inc (NASDAQ:ZNGA), on the other hand, is down 11% at $2.91 -- and on the short-sale restricted list -- with some analysts attributing the drop to a lackluster presentation from CEO Don Mattrick at the Bank of America Merrill Lynch Global Technology Conference yesterday. Meanwhile, options players are rushing to place bets on ZNGA, with intraday volume running at eight times the norm. Short-term options are popular -- the security's 30-day ATM IV has popped 9.2% to 68.7% -- and bulls are apparently buying to open the June and July 3 calls. Digging deeper, one speculator is simulating stock ownership by implementing a split-strike version of the synthetic long strategy. Specifically, the trader bought a block of 7,000 August 3 calls for $0.28 each, and helped fund the purchase by selling an equal amount of August 2.50 puts for $0.16 apiece. The strategist's risk is limited to the initial net debit of $0.12 per pair of options, as long as ZNGA remains north of $2.50 through August options expiration, while gains will increase the higher the shares rise north of $3.12 (call strike plus net debit) through the options' lifetime.

  • Finally, Broadcom Corporation (NASDAQ:BRCM) is extending its quest for two-year highs, peaking at $37.93 earlier in the session. The shares were last seen 2.1% higher at $37.83, after Barclays became the latest brokerage firm to join the bullish bandwagon, upgrading the stock to "equal weight" from "underweight" and lifting its price target to $40 from $28. Likewise, Exane BNP Paribas upgraded the equity to "neutral" from "underperform," and hiked its price target by 35% to $35. BRCM has advanced more than 18% so far this week, and option traders continue to wax optimistic on the shares. Intraday call volume is running at three times the typical pace, and has more than tripled put volume so far. While demand for short-term options is on the rise, as evidenced by the equity's 30-day ATM IV jump of 5.5% to 23.6%, the January 2015 40-strike call is most active. More than 7,000 calls have changed hands, IV at the strike is on the rise, and the majority of the contracts traded on the ask side -- collectively pointing to newly bought bullish bets. By purchasing the calls to open, the buyers expect BRCM to surmount the round-number 40 strike -- a feat not accomplished since April 2011 -- by January options expiration.
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