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Most Active Options Update: General Electric Company (GE)

General Electric Company option traders eye a breakout above resistance

by 4/24/2014 1:20 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is General Electric Company (NYSE:GE).

Most

Calls have been preferred over puts in General Electric Company's options pits in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, over the past 20 sessions, speculators on these exchanges have bought to open 117,578 calls on GE versus 33,486 puts, resulting in a top-heavy call/put volume ratio of 3.51.

This trend is continuing in today's session, with roughly 25,000 calls on the tape, compared to around 19,000 puts. With all but two of the top 10 most active strikes expiring in three months or less, the equity's 30-day at-the-money implied volatility has shot 9.3 percentage points higher to 12.7%, pointing to an increased demand for short-term options.

Meanwhile, nearly half of the day's call volume has centered on the June 27 strike, where 11,063 contracts have traded -- nearly all on the ask side, pointing to buyer-driven activity. What's more, IV has ticked higher, hinting at the initiation of new positions. Delta for the call was last seen lingering near 0.38, indicating a less than 2-in-5 chance the option will be in the money at the close on Friday, June 20 -- when back-month options expire.

Looking at the charts shows that GE has struggled against the $27 mark since falling below this level during an earnings-induced drop in late January. In the near term, this area could continue to serve as a ceiling, as peak call open interest in the front-month series resides at the May 27 strike. Simply stated, large accumulations of call open interest can often translate into options-related resistance, as the hedges related to these bets begin to unwind.

However, General Electric Company (NYSE:GE) is edging closer to this overhead mark today, up 0.5% at $26.55. Yesterday, rumors began swirling that the Dow component may possibly be in talks to acquire French industrial firm Alstom SA for a reported $13 billion. Alstom has since denied the M&A speculation.


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Canadian Solar Inc. (CSIQ) Bulls Bank On Extended Rally

Canadian Solar Inc. call volume is off the charts this afternoon

by 4/24/2014 12:27 PM
Stocks quoted in this article:

Option Brief: Canadian Solar Inc. (NASDAQ:CSIQ) has tacked on 5.7% this afternoon to trade at $30.88. Meanwhile, call volume is running at more than five times the typical intraday rate. Against this backdrop, the solar stock's 30-day at-the-money implied volatility (IV) has gained 4.5% to 71.1%, indicating elevated demand for short-term options.

Accordingly, the most active strike in CSIQ's options pits is the May 33 call, where nearly 4,000 contracts are on the tape -- the majority of which traded in two 1,000-plus-contract blocks. Digging deeper, 85% of the calls changed hands at the ask price, IV is trending higher, and volume has outrun open interest at the strike -- all signs of buy-to-open activity.

By purchasing the out-of-the-money contracts, today's traders expect CSIQ will extend its rally to north of $33 by the close on Friday, May 16, when the front-month options expire. Technically speaking, the stock has spent the majority of 2014 above this strike, and has been on a tear since bouncing off of its 50-week moving average last week. However, even if the shares remain south of the strike through expiration, the speculators risk losing no more than the initial premium paid.

Luckily for short-term traders, Canadian Solar Inc.'s (NASDAQ:CSIQ) Schaeffer's Volatility Index (SVI) of 68% ranks lower than 87% of comparable readings from the past 12 months. This suggests front-month options are currently inexpensive, from a volatility perspective. Also, the stock's Schaeffer's Volatility Scorecard (SVS) checks in at 100, meaning CSIQ has tended to make outsized moves, relative to what the options market has priced in. Looking ahead, the company is tentatively scheduled to report first-quarter earnings the same day front-month options expire.


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Netflix, Inc. (NFLX) Dip Sparks Eleventh-Hour Bets

Netflix, Inc. options traders are scooping up soon-to-expire contracts

by 4/24/2014 11:47 AM
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Option Brief: Netflix, Inc. (NASDAQ:NFLX) has backpedaled 2.8% to $343.50, effectively erasing the stock's post-earnings bull gap from Tuesday, and sending the shares into the red for the week. Against this backdrop, both bulls and bears are placing eleventh-hour bets on NFLX's end-of-week trajectory.

Intraday call and put volume are running at close to twice the normal rate, with around 41,000 calls and 47,000 puts exchanged. Echoing the demand for short-term contracts is the stock's 30-day at-the-money implied volatility (IV), which has jumped 6.1% to 40.9%. In fact, the 10 most active strikes expire at Friday's close, and all have seen volume surpass open interest, underscoring our suspicions of last-minute initiations.

Most popular are the weekly 4/25 350-strike call and 340-strike put, where around 5,900 and 4,900 contracts have traded, respectively. The majority of the options have changed hands on the ask side, volume has exceeded open interest, and IV has shot higher at both strikes, hinting at buy-to-open activity.

To profit on their call purchases, the buyers need NFLX to climb back atop $352.01 -- the strike plus the volume-weighted average price (VWAP) of $2.01 -- by tomorrow's close, when the options expire. On the flip side, the put buyers will make money if NFLX closes the week below breakeven at $336.11 (strike minus VWAP of $3.89). Risk, meanwhile, is limited to the initial premium paid for the options, should the contracts expire out of the money.

On the charts, Netflix, Inc. (NASDAQ:NFLX) shares are in danger of ending beneath their 10-day moving average for the first time since April 16. This trendline ushered the stock lower in the wake of its record high of $458, tagged in early March, and could resume its role as resistance. Off the charts, speculators are digesting reports of a proposed "fast lane" for Internet service providers -- reports the Federal Communications Commission said were "flat out wrong" -- as well as a streaming video deal between Amazon.com, Inc. (NASDAQ:AMZN) and HBO.


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Option Bulls Active Ahead of Pandora Media Inc (P) Earnings

An optimistic Pandora Media Inc trader initiated a massive trade this morning

by 4/24/2014 11:23 AM
Stocks quoted in this article:

Pandora Media Inc (NYSE:P) calls are trading at a faster-than-usual pace this morning, ahead of the Internet radio issue's turn in the earnings confessional tonight. Specifically, 21,000 calls are on the tape -- triple the intraday average rate, and seven times the number of puts traded so far.

Most active by a mile is P's September 35 call, which has seen north of 12,500 contracts switch hands, including a multi-exchange sweep of 11,010. Roughly 94% have traded at the ask price, volume outstrips open interest at the strike, and commentary from Trade-Alert points to buy-to-open activity.

Essentially, these speculators are aiming for Pandora shares -- currently hovering at $28.17 -- to rally by about 24% during the next five months and topple the 35 strike by September options expiration. If the stock doesn't meet those expectations, and the option expires out of the money, the most the call buyers stand to lose is the initial premium paid, assuming they're still holding onto the contracts. For the trader who initiated the sweep, the maximum loss would be nearly $1.9 million (11,010 contracts * 100 shares per contract * the volume-weighted average price of $1.71 per contract).

Taking a step back, Pandora call buying has become a trend over the past 10 weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, P boasts a 50-day call/put volume ratio of 1.95 on those three exchanges, with calls bought to open nearly doubling puts. Significantly, this ratio is higher than 84% of similar readings from the past year, indicating a stronger-than-usual preference for long calls relative to puts.

As alluded to earlier, Pandora Media Inc (NYSE:P) is slated to report first-quarter earnings this evening. Looking back, the company has matched or topped analysts' consensus bottom-line estimates in each of the last eight quarters. However, on average, the shares have lost 0.3% in the subsequent session, including 10.1% after February's news. Tonight, the Street is calling for a per-share loss of 14 cents from P.


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Two Ways to Play Calls On Molycorp Inc (MCP)

Molycorp Inc call volume picks up ahead of earnings

by 4/24/2014 10:37 AM
Stocks quoted in this article:

Option Brief: Calls were easily the options of choice on Molycorp Inc (NYSE:MCP) yesterday, trading at a 59% mark-up to the average daily volume, and outpacing puts by a more than 3-to-1 margin. While a number of speculators used calls bet on a positive end to the week, another group of traders took the non-traditional route to gamble on a slow churn for the rare earths producer over the next month or so.

Receiving notable attention on Wednesday was MCP's weekly 4/25 5-strike call, where 2,118 contracts changed hands -- mostly at the ask price, pointing to buyer-driven activity. Implied volatility shot 14.7 percentage points higher and open interest rose overnight, implying that new bullish positions were initiated. MCP closed right at the $5.00 mark last night -- and has moved slightly lower to $4.95 this morning -- but based on the volume-weighted average price (VWAP) of $0.09, breakeven at Friday's close is $5.09 (strike plus VWAP).

The most active strike in MCP's options pits once again was the weekly 5/23 5.50-strike call. However, the majority of the 4,314 contracts traded here did so on the bid side, signaling seller-driven volume. What's more, open interest rose the most of any other strike overnight, confirming the initiation of new positions. By writing these calls, the expectation is for MCP to remain south of $5.50 through the close on Friday, May 23 -- a time frame that includes the company's earnings report, tentatively scheduled for early May. In this ideal scenario, the options will expire worthless, and the traders can pocket the initial premium collected as their maximum potential reward.

On the charts, MCP has had a pretty rough go of things in 2014, with the shares off about 23% from their Jan. 3 year-to-date high of $6.45. More recently, the stock has struggled against the $5 mark since early March. Meanwhile, although the company's impending earnings results won't impact yesterday's call buyers, Wednesday's call sellers should note the equity has averaged a post-earnings single-session loss of 2.6% over the past eight quarters. Going out one week following Molycorp Inc's (NYSE:MCP) quarterly report, this loss widens to 9.7%.


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