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Option Clips: Twitter Inc, PepsiCo, Inc., and United Continental

Reviewing notable options activity on Twitter Inc, PepsiCo, Inc., and United Continental Holdings Inc

by 4/16/2014 12:32 PM
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Two stocks generating buzz on StockTwits today are microblogging pioneer Twitter Inc (NYSE:TWTR) and soft drink heavyweight PepsiCo, Inc. (NYSE:PEP). What's more, another name attracting unusual options attention is air carrier United Continental Holdings Inc (NYSE:UAL). Here's a look at how today's option traders have been placing their bets on these three names.

  • An upgrade to "neutral" from "underperform" at Sterne Agee isn't helping Twitter Inc (NYSE:TWTR) shake its negative bias, as the stock is off 2.3% today at $44.48 after enjoying its biggest single-session gain on record yesterday. (This is likely an unwelcome development for yesterday's aggressive bullish speculators.) Meanwhile, total Twitter option volume is slightly elevated, running at a 40% mark-up to average intraday levels. With April options set to expire at tomorrow's close, it appears as though some speculators are closing out of their short-lived positions. The 10 most active TWTR strikes today expire tomorrow, implied volatility (IV) is dropping at these strikes, and open interest trumps volume, suggesting that positions are being purchased and sold to close across a host of strikes.

  • Ahead of its earnings report tomorrow morning, PepsiCo, Inc. (NYSE:PEP) is up 1.2% at $84.94. What's more, PEP is also under the microscope as a possible interested party for a large stake of SodaStream International Ltd (NASDAQ:SODA). In the options pits, call volume is running at three times the usual pace, with notable attention at the April 85 call. Given that IV has surged at this strike, and a healthy portion of the volume has traded at the ask price, it is possible these are eleventh-hour bets on a post-earnings pop. PepsiCo has managed to top analysts' per-share estimates in each of the past eight quarters, but has averaged a post-earnings gain of just 0.6% in the subsequent session.

  • Finally, call players have descended upon United Continental Holdings Inc (NYSE:UAL), bringing call volume to nearly triple what's typically seen on an intraday basis. Accounting for more than half of this action is a 10,000-contract block at the September 52.50 strike. Volume exceeds open interest, and the block went off closer to the bid price, suggesting the out-of-the-money calls may have been sold to open. By placing this trade, the call seller presumes that UAL will stay beneath $52.50 through September options expiration. In its eight-plus-year history, UAL has never traded north of this level.


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