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Option Brief: Sirius XM Holdings Inc. (NASDAQ:SIRI) options are in demand, as the equity's 30-day at-the-money implied volatility hit a 52-week peak in intraday action yesterday, before settling 4.9% lower at 40.9%. In the same vein, the stock's Schaeffer's Volatility Index (SVI) of 40% stands higher than 82% of all comparable readings from the past year, suggesting SIRI's short-term options are expensive right now, from a historical perspective.
In yesterday's session, the shares of SIRI rebounded 2.3% to end at $3.14, after falling to a near-annual closing low on Wednesday. Options traders, meanwhile, picked up short-term calls to either gamble on a significant rebound, or to hedge their bearish bets.
Specifically, SIRI -- last seen fractionally higher at $3.15 -- saw roughly 18,000 calls cross the tape, more than four times the number of puts exchanged. More than half of the action transpired at the out-of-the-money (OOTM) April 4 call, where 10,010 contracts changed hands, primarily in several mid-sized blocks at the ask price. Almost all of the volume translated into new open interest, and the International Securities Exchange (ISE) confirms a healthy portion of buy-to-open activity.
As alluded to earlier, the buyers have one of two motives: to profit from a rally north of $4 -- in territory not charted since October -- by the close on Thursday, April 17, when front-month options expire, or to "insure" their shorted shares. Short interest on Sirius XM Holdings Inc. (NASDAQ:SIRI) grew by 30% during the last two reporting periods -- and now represents 8.3% of the stock's available float -- so it's possible the speculators bought the OOTM calls to guard against a short-term ascent. Whatever the motive, the maximum risk on the long calls is limited to the initial premium paid -- though, as we already established, it is relatively hefty at the moment.