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Option Clips: Baidu Inc (ADR), Intel, and Lululemon Athletica

Reviewing notable options activity on Baidu Inc (ADR), Intel Corporation, and Lululemon Athletica inc.

by 6/6/2014 1:38 PM
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Three names seeing notable option activity today amid developing news and/or unusual price action are Chinese Internet issue Baidu Inc (ADR) (NASDAQ:BIDU), tech concern Intel Corporation (NASDAQ:INTC), and yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU). Here's a look at how today's option traders have been placing their bets on these three names.

  • Baidu Inc (ADR) (NASDAQ:BIDU) is 3.4% higher at $172.10 on no apparent news, and is poised to close at its loftiest perch since mid-March. Overall options volume is running at twice the typical pace, with around 33,000 calls and 20,000 puts exchanged. The stock's 30-day at-the-money (ATM) implied volatility (IV) is 2.6% higher at 31.2%, after touching a new 52-week low out of the gate, pointing to elevated demand for short-term contracts. The most active option not expiring today is the June 165 put, which traders are apparently selling to open; the majority of the puts crossed on the bid side, and IV is 3 percentage points higher at the strike. By writing the puts to open, the speculators expect BIDU to remain north of $165 through the close on Friday, June 20, rendering the puts worthless at expiration and allowing the sellers to retain the entire premium received from the sale.

  • Intel Corporation (NASDAQ:INTC) is up 1.5% at $28.08 -- and earlier touched a fresh two-year high of $28.17 -- after the company discussed next-generation PC plans at the annual Computex trade fair. Eleventh-hour option bulls have taken notice, with intraday call volume more than doubling the average, at 47,000 contracts exchanged so far. For comparison, fewer than 17,000 INTC puts have changed hands. Most popular is the weekly 6/6 28-strike call, where more than 6,600 contracts have traded. Two-thirds of the calls crossed on the ask side, and volume trumps open interest at the strike, pointing to newly bought bullish bets. By purchasing the calls to open, the buyers expect INTC to extend its lead north of $28 through the close today, when the options expire.

  • Finally, Lululemon Athletica inc. (NASDAQ:LULU) is 3.7% higher at $44.47, and calls are flying off the shelves at three times the typical intraday pace ahead of LULU's turn in the earnings confessional next Thursday. The equity's 30-day ATM IV is edging higher this afternoon, and its Schaeffer's Volatility Index (SVI) of 67% stands higher than 78% of all other readings from the past year. In other words, LULU's short-term options are relatively pricey right now, from a historical perspective. Speaking of short-term speculators, the stock's weekly 6/6 44-strike call is seemingly popular among eleventh-hour option bulls, while longer-term, more aggressive traders are buying to open January 2015 60-strike calls. The former are banking on LULU to keep moving atop $44 through today's close, when the options expire, while the latter are either expecting the shares to muscle north of $60 -- territory not charted in 2014 -- by January 2015 options expiration, or are hedging their bearish bets in the event of a rally. Short interest accounts for 18.3% of LULU's total float, so it's possible the out-of-the-money calls are being bought as long-term "insurance."
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