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Microsoft Corporation (MSFT) Bull Makes a Bold Bet

Calls remain hot, despite Microsoft Corporation's (MSFT) technical troubles

by 3/27/2015 3:02 PM
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Option bulls have set their sights on Microsoft Corporation (NASDAQ:MSFT) in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 50-day call/put volume ratio of 2.13 ranks in the 96th annual percentile. Simply stated, calls have been bought to open over puts at a faster clip just 4% of the time within the past year.

It's a similar set-up in today's trading, with calls crossing the tape at 1.5 times what's typically seen at this point in the day, and outpacing puts by a nearly 2-to-1 margin. The stock's April 46 call is easily the most active option, thanks to a massive block of 20,637 contracts that appears to have been bought to open for $0.02 apiece earlier. If these are indeed new long positions being initiated, the goal is for MSFT to move north of $46 by the close on Friday, April 17 -- when front-month options expire.

Should the shares settle south of the strike at expiration, the most today's call buyer stands to lose is the initial premium paid. Good news for the trader -- the equity's Schaeffer's Volatility Index (SVI) of 20% ranks lower than 79% of similar readings taken in the past 52 weeks. In other words, premium on MSFT's front-month options is pricing in relatively low volatility expectations at the moment.

Technically speaking, Microsoft Corporation (NASDAQ:MSFT) has had a terrible go of it in 2015 -- due in large part to a disastrous turn in the earnings confessional in late January -- down 11.9%. The shares are extending this negative price action today, off 0.8% at $40.90, and on pace for their worst weekly close since Jan. 30.


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United States Steel Corporation (X) Swarmed by Put Buyers

United States Steel Corporation (X) is seeing a rare dose of put buying today

by 3/27/2015 2:28 PM
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United States Steel Corporation (NYSE:X) is staring at a 1.4% loss this afternoon, hovering around $24.50. Not surprisingly, option bettors have set their sights on puts.

Diving right in, 23,000 puts are currently on the tape -- or about twice the amount expected for this point in the day. Drilling deeper, the May 21 put is among X's most active contracts, and data suggests fresh positions are being purchased here. In so doing, the put buyers are rolling the dice on the commodity stock tumbling below $21 by the close on Friday, May 15, when the back-month options expire.

Today's penchant for put buying represents a departure from the longer-term trend. X's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.32 -- which ranks in the 71st percentile of its annual range. However, it's possible some of these calls -- especially at out-of-the-money strikes -- were purchased by short sellers as upside protection. After all, one-third of X's float is sold short, representing 5.5 times average daily trading levels.

On the technical front, United States Steel Corporation (NYSE:X) hasn't been much to look at. The shares are down 8.4% year-to-date, and have struggled for the last couple months to conquer congestion in the $25-$26 area.


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Petroleo Brasileiro Petrobras SA (PBR) Bears See More Trouble Ahead

Petroleo Brasileiro Petrobras SA's (ADR) (PBR) May 5 put is popular today

by 3/27/2015 2:09 PM
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Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is down 0.4% at $5.77 this afternoon, as crude oil retreats amid easing tensions in the Middle East. Options traders are responding in kind, with puts trading at 1.2 times the expected intraday rate, and outpacing calls by a more than 2-to-1 margin.

Most active is PBR's May 5 put, where 9,511 contracts have crossed the tape. It appears some of these positions are being bought to open for a volume-weighted average price (VWAP) of $0.30, making at-expiration breakeven for the put buyers $4.70 (strike less VWAP) -- a new 11-year low for PBR. Should the shares be sitting north of the strike at the close on Friday, May 15 -- when back-month options expire -- the most the speculators stand to lose is 100% of the premium paid.

Today's accelerated put activity is nothing new for the stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), PBR's 50-day put/call volume ratio of 0.58 ranks in the 89th annual percentile. Just two weeks ago, in fact, traders were rolling the dice on the stock to hit even lower lows over the next several weeks.

What's more, that same day, PBR bottomed at an 11-year low of $4.90. Longer term, the shares have surrendered 72% since hitting an annual high of $20.94 in early September, amid increasing pressure from their 40-day moving average. Off the charts, Petroleo Brasileiro Petrobras SA (NYSE:PBR) announced it has nominated Vale SA (NYSE:VALE) CEO Murilo Ferreira to head its board. Additionally, the company has cut off payments to Brazil engineering firm Galvao Engenharia -- which has filed for bankruptcy protection -- amid its ongoing corruption scandal.

Daily Chart of PBR Since September 2014 With 40-Day Moving Average

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Bulls Storm Surging Novavax, Inc. (NVAX)

Novavax, Inc. (NVAX) calls are trading at an accelerated pace

by 3/27/2015 1:57 PM
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Novavax, Inc. (NASDAQ:NVAX) is gaining fast today, adding 8.8% to land at $8.25, thanks to a "buy" initiation and $10 price target from Citigroup. Also, the brokerage firm expressed optimism over a pair of vaccines the company is developing. Call buying has since picked up in the stock's options pits, with the contracts crossing at an 80% mark-up to usual intraday volumes. The most popular contract by a wide margin is the April 8 call, and data gives the impression of buy-to-open activity. These traders are betting on the shares to move further above the $8 level by the close on Friday, April 17, when the options expire.

It's not a surprise to see NVAX's traders rushing to pick up calls. According to the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.40 -- which ranks in the 8th percentile of its annual range -- short-term speculators are more call-skewed than normal.

Analysts have made their positive feelings on the stock clear, with all five covering brokerage firms rating it a "strong buy." Also, Novavax, Inc.'s (NASDAQ:NVAX) average 12-month price target of $10.38 stands in territory not charted in roughly 13 years. Year-to-date, NVAX has added 39%.


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Zulily, Inc. (ZU) Traders Place Hail Mary Bets

Zulily Inc (ZU) has dropped 44% in 2015

by 3/27/2015 1:33 PM
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Over the past couple weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Zulily Inc (NASDAQ:ZU) calls have been changing hands at an extreme rate. Specifically, the e-commerce hub's 10-day call/put volume ratio across this trio of exchanges stands at an annual high of 83.50.

That trend is continuing today, with ZU calls trading at nearly triple the usual intraday clip, and about twice the pace of puts. Eleventh-hour bulls are active, as the stock's most popular option is the weekly 3/27 13.50-strike call, where new positions are being purchased. In other words, these call buyers anticipate ZU will muscle atop $13.50 by tonight's close, when the weekly series expires.

This is an ambitious bet, given the call's short life span. ZU -- up just 0.2% to trade at $13.05 -- would need to gain more than 3.4% in less than three hours for the option to move into the money.

Also, from a longer-term technical perspective, Zulily Inc (NASDAQ:ZU) has been a dud. Just three months into 2015, the shares have plummeted 44% -- largely the result of an earnings-induced bear gap in mid-February.


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