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Most Active Options Update: Twitter Inc (TWTR)

Traders are eyeing front-month gains for Twitter Inc

by 11/24/2014 2:38 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 today is Twitter Inc (NYSE:TWTR), where front-month strikes are in focus.

Most Active Options Table

Twitter Inc calls are trading at more than three times the pace of puts so far this afternoon. In fact, all 10 of the stock's most active strikes are on the call side of the fence, led by the December 39 strike, where 6,257 contracts are on the tape.

Based on the fact that 63% of the calls changed hands at the ask price, and there are just 2,222 contracts in open interest at the front-month strike, it's safe to assume bullish bets are being initiated. In other words, the call buyers are banking on TWTR to continue heading north through the close on Friday, Dec. 19, when the December series expires.

Currently, Twitter Inc (NYSE:TWTR) is up 0.2% at $40.10, meaning the calls are already in the money. However, in order for the traders to profit at expiration, the underlying must be perched above breakeven at $41.25 -- or the strike plus the volume-weighted average price of $2.25.


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Most Active Weekly Options: Facebook Inc (FB)

Bullish bettors expect Facebook Inc to topple $75 by week's end

by 11/24/2014 1:59 PM
Stocks quoted in this article:

The 20 stocks listed in the table below are the names that have attracted the highest weekly options volume during the past 10 trading days. Those 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 today is Facebook Inc (NASDAQ:FB), where call volume nearly triples put volume.

Most Active Weekly Options Table

Facebook Inc has gained a modest 0.6% this afternoon to trade at $74.18, and options traders have set their sights on additional upside through the end of the week. Specifically, the social networking stock's most active option is the weekly 11/28 75-strike call, where 8,261 contracts are on the tape.

The majority of the contracts have changed hands at the ask price, implied volatility (IV) has edged higher -- even though FB's 30-day at-the-money IV touched a 52-week low earlier -- and volume outstrips open interest, collectively implying buy-to-open activity. In other words, the buyers anticipate the shares will topple $75 by Friday's close, when the series expires.

While the underlying need only gain about 1% to hit the aforementioned strike, Facebook Inc (NASDAQ:FB) could face a potentially rough road ahead. The $75 area has acted as resistance this month, reinforced by the more than 7,500 contracts in call open interest at the corresponding strike in the 11/28 series. What's more, the shares are now staring up at their 100-day moving average (at $74.47), which recently served as support, but could now reverse roles to limit additional upside.


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Micron Technology, Inc. (MU) Traders Eye Higher Highs

Micron Technology, Inc. touched a 12-year high out of the gate

by 11/24/2014 10:33 AM
Stocks quoted in this article:

Micron Technology, Inc. (NASDAQ:MU) has jumped 2.4% this morning to trade at $35.12, and earlier touched a 12-year high of $35.25. This follows Friday's similarly bullish session, during which the shares tacked on 3.3%, calls traded at twice the typical single-session rate, and the stock's 30-day at-the-money implied volatility rose 3.6% to 31% -- indicating elevated demand for short-term strikes.

Friday's most active non-expiring option was the weekly 12/12 36-strike call. Nearly nine in 10 crossed at the ask price, and open interest soared over the weekend, making it safe to assume bullish bets were initiated -- a theory confirmed by data from the International Securities Exchange (ISE) and Trade-Alert.

In short, these call buyers anticipate MU will topple $36 by the close on Friday, Dec. 12, when the weekly series expires. Gains are theoretically unlimited to the upside, while losses are capped at the initial premium paid, should the stock be sitting below the strike at expiration.

Longer term, Micron Technology, Inc. (NASDAQ:MU) has been a technical titan, advancing 62% year-to-date. Should this strong price action continue, short-covering activity could provide a catalyst even higher, as roughly 10% of the equity's float is sold short.


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Time Warner Inc (TWX) and the $1.2 Million Bearish Bet

Time Warner Inc puts continue to see accelerated activity

by 11/21/2014 2:49 PM
Stocks quoted in this article:

Option bears have set their sights on Time Warner Inc (NYSE:TWX) in recent months, as evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The equity's 50-day put/call volume ratio of 0.58 ranks higher than all other readings taken over the past year, meaning puts have been bought to open over calls at an annual-high clip.

It's a similar setup in today's session, with puts trading at nearly 14 times the intraday average, and outpacing calls by a roughly 10-to-1 margin. The majority of the day's put volume occurred when two massive blocks totaling 22,604 contracts were bought to open at TWX's December 75 put. If this activity came at the hands of one trader, she ponied up roughly $1.2 million for her bearish bet ([11,852 contracts * $0.54 premium paid] + [10,752 contracts * $0.55 premium paid] * 100 shares per contract).

This is the most the speculator stands to lose, should TWX maintain its perch atop $75 through the close on Friday, Dec. 19, when the soon-to-be front-month contracts expire. Meanwhile, her profit will accrue on a move south of the respective breakeven marks of $74.46 and $74.45 (strike less the premiums paid). The options market isn't too confident the put will be in the money at expiration, as its delta is docked at negative 0.18.

This bearish positioning is a bit surprising, considering TWX is up roughly 20% in 2014. As such, it's possible that a portion of the recent put buying -- particularly at out-of-the-money strikes -- could be a result of shareholders protecting paper profits against an unexpected decline.

Today, the shares are off 0.6% at $80.09, despite two upbeat fundamental developments. Specifically, DISH Network Corp (NASDAQ:DISH) has extended an olive branch to TWX's Turner Broadcasting division -- as well as CBS Corporation (NYSE:CBS). Additionally, Time Warner Inc (NYSE:TWX) scored a legal victory in its proposed merger with Comcast Corporation (NASDAQ:CMCSA).


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Options Radar: J C Penney Company Inc, AbbVie Inc, and Dollar General

Reviewing notable options activity on J C Penney Company Inc, AbbVie Inc, and Dollar General Corp.

by 11/21/2014 2:37 PM
Stocks quoted in this article:

Option traders have taken a shine to department store J C Penney Company Inc (NYSE:JCP), drugmaker AbbVie Inc (NYSE:ABBV), and discount retailer Dollar General Corp. (NYSE:DG). Here's a look at how speculators have been placing their bets on JCP, ABBV, and DG.

  • J C Penney Company Inc (NYSE:JCP) is following the broader equities market higher, up 0.8% at $7.32. However, the stock remains 20% lower year-to-date, and options traders are rolling the dice on a longer-term slump for the shares. Intraday put volume is running at a slightly accelerated clip relative to the norm, and has outpaced call volume by a margin of 2-to-1. Most active by a mile is the deep out-of-the-money January 2017 4-strike put, which has seen more than 6,200 contracts cross the tape. Implied volatility (IV) has popped 2.2 percentage points at the strike, and most of the puts traded on the ask side, underscoring our theory of freshly bought bearish bets. By purchasing the puts to open, the buyers expect JCP to breach $4 -- and sink into record-low territory -- within the next couple of years.

  • AbbVie Inc (NYSE:ABBV) is 2.9% higher at $67.05, and earlier notched a record peak of $67.29, as traders and analysts celebrate a regulatory win. Specifically, the European Medicines Agency (EMA) recommended approval for two of ABBV's hepatitis C drugs. In light of the news and the stock's subsequent rally, Morgan Stanley hiked its price target to $72 from $65, and reiterated an "overweight" rating. In the same optimistic vein, ABBV calls are trading at a 61% mark-up to the average intraday rate, and outnumber puts by a margin of more than 10-to-1. Digging deeper, it looks like short-term bulls are rolling the dice on higher highs for ABBV, buying to open the soon-to-be front-month December 70 calls.

  • Finally, Dollar General Corp. (NYSE:DG) is also flirting with record highs. The security topped out at $67.95 earlier, and was last seen 1.7% higher at $67.65. DG Wednesday said it expects to update Family Dollar Stores, Inc. (NYSE:FDO) shareholders about the duo's M&A status with the Federal Trade Commission (FTC) in the "coming weeks," and specifically, how many stores DG will need to sell to win FTC approval of an FDO buyout. Against this backdrop, DG's 30-day at-the-money IV hit a 52-week peak earlier, reflecting escalating demand -- and, thus, higher prices -- for short-term options. Calls are trading at eight times the typical intraday clip, and one bull constructed a spread to offset the cost of relatively expensive front-month options. The investor bought a block of 6,930 December 70 calls, and simultaneously sold an equal number of December 75 calls, resulting in a net debit of $1.50 per pair of contracts. The strategist's reward will increase from $71.50 (bought strike plus net debit) to $75, at which his profit potential peaks at $3.50 (difference between call strikes, minus net debit), no matter how high DG climbs between now and expiration on Friday, Dec. 19. On the flip side, the trader will forfeit just the net debit if the stock fails to conquer $70.

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