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Option Clips: MannKind, Urban Outfitters, and First Solar

Reviewing notable options activity on MannKind Corporation, Urban Outfitters, Inc., and First Solar, Inc.

by 5/19/2014 2:06 PM
Stocks quoted in this article:

Two equities generating buzz on StockTwits today are pharmaceutical firm MannKind Corporation (NASDAQ:MNKD) and retailer Urban Outfitters, Inc. (NASDAQ:URBN). Meanwhile, alternative energy issue First Solar, Inc. (NASDAQ:FSLR) is also popular in the options pits. Here's a look at how traders have been aligning their speculative bets today.

  • MannKind Corporation (NASDAQ:MNKD) is 5.8% higher at $7.43, bringing its year-to-date gain to 43%. Ahead of the company's shareholder meeting on Thursday -- and the FDA's scheduled review of Afrezza, MNKD's diabetes treatment, on July 15 -- options players are picking up calls at four times the typical intraday pace. Digging deeper, it appears some speculators are buying to open the deep in-the-money August 4 call, where implied volatility (IV) has shot 13 percentage points higher, and nearly two-thirds of the contracts traded on the ask side. Meanwhile, now is an opportune time to speculate with MNKD's short-term contracts, as the equity's 30-day at-the-money (ATM) IV hit a 52-week low earlier in the session. However, today's appetite for bullish bets runs counter to the recent trend, and stands in stark contrast to the sentiment on the Street. Specifically, short interest accounts for 28.5% of MNKD's total available float, representing more than 13 sessions' worth of pent-up buying demand, at the stock's average pace of trading. Should the shares extend their upward momentum, a mass exodus of option bears or a short-squeeze situation could add fuel to the security's fire.

  • Urban Outfitters, Inc. (NASDAQ:URBN) is down 1.3% at $35.73, just hours before the company's first-quarter earnings release. Ahead of the event, demand for short-term options is on the rise, as URBN's 30-day ATM IV is up 9.4% at 32%. Most notably, call volume is running at 17 times the average intraday rate, with buy-to-open activity detected at the out-of-the-money (OOTM) June 37 and 38 calls. Again, though, today's affinity for bullish bets is relatively rare for URBN options traders -- especially the short-term variety. The stock's Schaeffer's put/call open interest ratio (SOIR) rests at a 12-month high of 0.96, implying that short-term options players haven't been more put-heavy during the past year. Plus, the stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at an annual high of its own, at 3.63, indicating that during the past two weeks, traders have bought to open URBN puts over calls at the fastest pace in more than a year.

  • Finally, First Solar, Inc. (NASDAQ:FSLR) is fractionally lower at $59.57, but remains more than 9% higher year-to-date. The stock is now testing its footing atop its 32-week moving average, which acted as a launching pad earlier this year, and options players are either wagering on or hedging against more upside in the near term. The stock's 30-day ATM IV has edged 2.2% higher to 44.1%, and call volume is trading at twice the normal rate. More than one-third of the action has transpired at the OOTM June 65 call, where IV is trending higher and 87% of the contracts traded on the ask side. However, short interest accounts for nearly 12% of FSLR's total available float, so some of the calls may have been purchased by short sellers looking for short-term protection. Whatever the motive, the equity's front-month contracts are inexpensive right now, from a historical standpoint; the stock's Schaeffer's Volatility Index (SVI) of 44% sits just 5 percentage points from an annual low. As per today's theme, though, the appetite for long calls marks a change of pace for FSLR, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio stands at an annual peak of 0.88.

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