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Broadcom Corporation (BRCM) Bulls Bet Big On the New Year

Broadcom Corporation hasn't traded north of $45 since February 2011

by 11/26/2014 2:55 PM
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Similar to sector peer Micron Technology, Inc. (NASDAQ:MU), Broadcom Corporation (NASDAQ:BRCM) tagged a fresh technical milestone today -- hitting $43.14 for the first time in more than three years. At last check, the stock was sitting just below this mark, at $43.12 -- prompting option traders to roll the dice on a move to new multi-year highs over the next two months.

Taking a quick step back, calls are crossing the tape at a rate four times what's typically seen at this point in the day, and are outpacing puts by a 6-to-1 margin. More than two-fifths of the day's call volume has centered on BRCM's January 2015 45 strike, where 13,407 contracts have traded -- mostly at the ask price, hinting at buyer-driven activity. Implied volatility is up 2 percentage points, and volume outstrips open interest, making it safe to assume a fresh batch of bullish bets is being initiated.

Based on the volume-weighted average price (VWAP) of $0.85, the call buyers' profits will accrue on a move north of breakeven at $45.85 (strike plus VWAP) -- territory not charted by BRCM since February 2011. Losses, meanwhile, are limited to the initial premium paid, should the stock settle south of the strike at January options expiration -- a time frame which includes the company's annual analyst day, slated for Tuesday, Dec. 9.

Widening the sentiment scope reveals today's bullish bias is just more of the same for a stock that's rallied more than 45% year-to-date. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), specifically, BRCM's 10-day call/put volume ratio of 25.98 ranks in the 98th percentile of its annual range. In other words, Broadcom Corporation (NASDAQ:BRCM) calls have been bought to open over puts at a faster pace just 2% of the time within the past year.


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Most Active Weekly Options: Micron Technology, Inc. (MU)

Micron Technology, Inc. hit yet another decade-plus high today

by 11/26/2014 1:53 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 Micron Technology, Inc. (NASDAQ:MU), with call volume doubling put volume this afternoon.

Most Active Weekly Options Table

As alluded to, Micron Technology, Inc. calls are more popular than their put counterparts today, as seven of the 10 most active strikes are calls. Nevertheless, the most active weekly option -- and the third most active MU option overall -- is the 12/5 35-strike put, where more than 4,000 contracts have crossed the tape.

These contracts aren't necessarily of the bearish variety, though. About 91% of the volume at the weekly strike has traded at the bid price, and volume outstrips open interest, suggesting traders may be writing to open these positions. In fact, data from the International Securities Exchange (ISE) confirms some sell-to-open activity.

Long story short, these sellers anticipate MU will maintain its perch atop $35 through the close next Friday, when the weekly series expires. Delta on the put is currently hovering at negative 0.44, meaning the options market is giving the contract a less than 1-in-2 chance of being in the money at expiration.

This probability was slightly higher last night, when delta was negative 0.54, but has declined on the equity's intraday gains. Micron Technology, Inc. (NASDAQ:MU) has tacked on 1.1% this afternoon to trade at $35.19, bringing its year-to-date advance to nearly 62%. What's more, the outperforming shares touched yet another 12-year high of $35.29 in mid-morning trading.


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Calls Hot as TASER International, Inc. (TASR) Soars

TASER International, Inc. calls are trading at eight times the intraday average

by 11/26/2014 12:13 PM
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TASER International, Inc. (NASDAQ:TASR) is up 6.6% -- and earlier hit a nine-year high of $22.35 -- after North Carolina's Winston-Salem Police Department upped its order with the company. Option traders are responding in kind, with calls trading at eight times the intraday average, and outpacing puts by a 9-to-1 ratio.

Most active is the equity's December 23 call, where 2,627 contracts are on the tape. The majority of these have changed hands at the ask price, implied volatility is up 2 percentage points, and volume outstrips open interest, making it safe to assume new positions are being purchased.

The volume-weighted average price (VWAP) for the calls is $0.55, making at-expiration breakeven $23.55 (strike plus VWAP) -- territory not charted by TASR since January 2005. Gains will accrue north of here, while losses are capped at the initial premium paid, should the stock settle south of the strike at expiration.

However, with a significant portion of the equity's float dedicated to short interest, the activity at this out-of-the-money strike could be at the hands of shorts hedging against any additional upside. Regardless of the reason, premium on the equity's front-month options is relatively inexpensive at the moment. Specifically, TASER International, Inc.'s (NASDAQ:TASR) Schaeffer's Volatility Index (SVI) of 47% ranks lower than 70% of similar readings taken in the past year.


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BlackBerry Ltd Traders Count On Technical Support

BlackBerry Ltd announced a new iPhone trade-in program this morning

by 11/26/2014 10:18 AM
Stocks quoted in this article:

Short-term contracts were targeted in BlackBerry Ltd's (NASDAQ:BBRY) options pits yesterday. In fact, eight of the 10 most active strikes will expire within the next six weeks.

Looking more closely, traders showed a particular affinity for BBRY's weekly 11/28 10-strike and 12/5 9.50-strike puts, where a collective 3,538 contracts changed hands. The vast majority did so at the bid price, and open interest soared overnight at both strikes, making it safe to assume at least some of the out-of-the-money contracts were sold to open. This theory is corroborated by data from the International Securities Exchange (ISE).

In short, these put writers expect BBRY to maintain its footing atop the strikes through the respective expiration dates, at the end of this week and next week. To put things in perspective, delta on the higher-strike contract is negative 0.094, while delta on the lower is negative 0.086 -- signifying a less than 1-in-10 chance either option will be in the money at expiration.

This morning, BlackBerry Ltd (NASDAQ:BBRY) is 0.6% higher at $10.42, following the company's announcement that it will offer customers up to $550 to trade in their Apple Inc. (NASDAQ:AAPL) iPhones in exchange for the new BBRY Passport smartphone. Longer term, the shares have advanced more than 40% year-to-date.


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Short-Term Bulls Target Priceline Group Inc (PCLN)

The weekly 11/28 series was popular in Priceline Group Inc's options pits yesterday

by 11/26/2014 9:37 AM
Stocks quoted in this article:

Priceline Group Inc (NASDAQ:PCLN) gained 1.6% yesterday to settle at $1,179.17, bringing the shares above their year-to-date breakeven mark. Meanwhile, the stock's 30-day at-the-money implied volatility (IV) spiked 4.1% to 20.1%, suggesting short-term contracts were once again in demand.

A closer look reveals this is true. In fact, each of PCLN's 10 most active options expires at this Friday's close. In the lead was the weekly 11/28 1,170-strike call, where 1,713 contracts changed hands -- the majority at the ask price, pointing to buyer-driven activity. What's more, IV edged slightly higher, and open interest rose overnight, suggesting newly bought bullish bets.

Breakeven for the buyers at Friday's close is $1,177.66, or the strike plus the volume-weighted average price of $7.66. In other words, yesterday's traders are already staring at potential paper profits. Gains are theoretically unlimited north of breakeven, while losses are capped at the initial premium paid, should Priceline Group Inc (NASDAQ:PCLN) retreat below the strike by week's end.


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