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King Digital Entertainment PLC (KING) Call Volume Spikes

Some King Digital Entertainment PLC call buyers may be short sellers in disguise

by 10/23/2014 2:40 PM
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King Digital Entertainment PLC (NYSE:KING) is up 2% this afternoon at $11.50, but remains a long way from its March IPO price of $20.50. Nevertheless, the positive price action is luring options traders to the table -- especially on the call side, where volume is running at nearly quadruple the expected intraday rate.

Digging deeper, the two most active strikes are the November 12.54 and 11.54 calls, where 1,911 and 629 contracts have traded, respectively -- mostly at the ask price, suggesting buyer-driven volume. Opening activity is a possibility at the higher-strike call, according to Trade-Alert -- which speculates short sellers may be initiating the positions to act as hedges, ahead of KING's upcoming earnings report, the night of Thursday, Nov. 6. Meanwhile, buy-to-open action is more clear-cut at the lower-strike call, as volume outstrips open interest.

As alluded to, King Digital Entertainment PLC (NYSE:KING) -- maker of "Candy Crush Saga," and as of yesterday on Facebook Inc (NASDAQ:FB), "Candy Crush Soda Saga" -- has been a technical disaster since publicly debuting. In fact, the shares have underperformed the broader S&P 500 Index (SPX) by 40 percentage points during the past three months. It's no wonder, therefore, that one-quarter of KING's total float is sold short.


Most Active Weekly Options: Microsoft Corporation (MSFT)

Option skeptics disregard Microsoft Corporation's historical post-earnings price action

by 10/23/2014 1:40 PM
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The 20 stocks listed in the table below are the S&P 500 Index (SPX) components that have attracted the highest weekly 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 Microsoft Corporation (NASDAQ:MSFT), as traders up the bearish ante ahead of the company's after-the-close quarterly earnings report.

Most Active Weekly Options Table

As noted, Microsoft Corporation will follow in the footsteps of a number of its fellow Dow components when it steps into the earnings confessional after tonight's close. Traders are flooding the stock's options pits ahead of the results, but -- despite MSFT averaging a single-session post-earnings gain of 2.1% over the past four quarters -- many are betting on some earnings-induced turbulence through week's end.

Taking a quick step back, overall volume is running at two times the average intraday pace, with puts having a roughly 8,000-contract lead over calls. Two of MSFT's five most active options expire at Friday's close, with the equity's 10/24 46.50-strike call seeing the most action out of this duo. However, the majority of these calls went off at the bid price, implied volatility (IV) has soared 22.1 percentage points, and volume outstrips open interest, pointing to sell-to-open activity. By writing the calls, traders expect MSFT to stay south of the $46.50 through tomorrow's close, when the series expires.

Elsewhere, MSFT'S weekly 10/24 44.50-strike put has received notable attention, with 6,289 contracts on the tape at last check. A large portion of these puts traded at the ask price, IV is up 22.4 percentage points, and volume exceeds current levels of open interest. Summing it all up, it seems new positions are being purchased. Delta on the put is docked at negative 0.41, suggesting a roughly 2-in-5 chance the option will be in the money at expiration.

Today's skeptical stance among option traders is just more of the same for a stock that's up roughly 20% year-to-date to trade at $44.88. In fact, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day put/call volume ratio of 0.90 ranks in the highest percentile of its annual range. Should Microsoft Corporation (NASDAQ:MSFT) turn in another well-received earnings report, an unwinding of these bearish bets could create a tailwind for the shares.


Options Radar: Infinera Corp., Under Armour Inc, and AK Steel Holding

Reviewing notable options activity on Infinera Corp., Under Armour Inc, and AK Steel Holding Corporation

by 10/23/2014 12:00 PM
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Three stocks seeing notable options activity today are optical networking equipment provider Infinera Corp. (NASDAQ:INFN), athletic apparel maker Under Armour Inc (NYSE:UA), and industrial metal concern AK Steel Holding Corporation (NYSE:AKS). Here's a look at how speculators have been placing their bets on INFN, UA, and AKS.

  • A strong quarterly showing from Infinera Corp. (NASDAQ:INFN) helped send shares to a fresh six-year peak of $13.41 earlier, with INFN last seen 26.3% higher at $13.39. Adding to the bullish buzz is a round of brokerage notes, including a price-target hike to $14 from $13 at Goldman Sachs, and a spot on the brokerage firm's coveted "Conviction Buy" list. In the options pits, calls are trading at 24 times the average intraday rate, and are outpacing puts by a nearly 12-to-1 margin. A number of speculators are betting on more upside for INFN over the next several months, by buying to open the equity's December 12 call and January 2015 13-strike call.

  • Also trading higher in the wake of its quarterly results is Under Armour Inc (NYSE:UA), which is up 0.2% at $66.18. Today's positive price action is just more of the same for UA, which has rallied nearly 52% in 2014, and tagged a record peak of $73.42 as recently as Sept. 8. Following this morning's scheduled event, the stock's 30-day at-the-money implied volatility has plunged 32.1% to 32.2%. This sharp drop in volatility may be what is prompting speculators to close out their short November 66 puts at a profit. In fact, a number of these positions were sold to open yesterday for a volume-weighted price (VWAP) of $3.04, and today are being bought to close at a VWAP of $2.26.

  • AK Steel Holding Corporation (NYSE:AKS) is following in the bullish footsteps of the broader equities market today, and was 5.5% higher at last check to linger near $7.13. The equity has put in a solid showing in recent sessions -- thanks to an upbeat outlook from Nomura last Friday -- and is on pace to notch a nearly 13.8% week-to-date gain. Options traders think this momentum will continue over the next four weeks -- a time frame which includes the company's early morning earnings report on Tuesday, Nov. 4. Specifically, 56% of AKS' call volume this morning has centered at the November 7 strike, where it appears the majority of the positions are being bought to open for a VWAP of $0.55.


American Airlines Group Inc (AAL) Option Bears Aim Lower

American Airlines Group Inc is moving little, despite reporting earnings

by 10/23/2014 10:31 AM
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American Airlines Group Inc (NASDAQ:AAL) is up slightly this morning at $37.13, after earlier posting a third-quarter earnings beat. This is likely a disappointment to many traders from yesterday, when puts crossed at nearly double the usual single-session rate.

Digging deeper, short-term contracts were once again popular on Wednesday, per AAL's 30-day at-the-money (ATM) implied volatility, which rose 2.7% to 49.7%. Specifically, the equity's most active option was the weekly 10/24 37-strike put, where roughly 8,900 contracts changed hands. The majority did so at the ask price, and open interest soared overnight, collectively suggesting buy-to-open activity.

By scooping up the ATM puts, these speculators expect America Airlines Group Inc (NASDAQ:AAL) will end the week -- when the contracts expire -- south of $37. Delta on the put is negative 0.46, indicating a 46% chance the option will be in the money at tomorrow's close.


World Wrestling Entertainment, Inc. (WWE) Sell-Off Has Bears Piling On

World Wrestling Entertainment, Inc. will report earnings after next Thursday's open

by 10/22/2014 2:39 PM
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Put players have been active on World Wrestling Entertainment, Inc. (NYSE:WWE) in recent weeks, as evidenced by data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, the stock's 10-day put/call volume ratio across this trio of exchanges sits at 26.26 -- in the 98th percentile of its annual range. Simply stated, puts have been bought to open over calls with more rapidity just 2% of the time within the past year.

It's a similar set-up in today's session, with puts crossing the tape at a rate 32 times the intraday average, and outpacing calls by a more than 11-to-1 margin. The majority of the day's action has centered at the November 12 put, where 6,120 contracts have changed hands -- mostly at the ask price, hinting at buyer-driven activity. Implied volatility has jumped 5.7 percentage points, and volume easily outstrips open interest, making it safe to assume new positions are being initiated. Delta on the put is docked at negative 0.32, suggesting a roughly 1-in-3 shot the option will be in the money at the close on Friday, Nov. 21 -- when the front-month series expires.

This bearish positioning shouldn't be too surprising, considering WWE is down almost 60% from its March 13 record high of $31.98. Today, in fact, the shares have surrendered 7.2% to churn near $12.83, after Nathaniel August -- founder of Mangrove Partners -- told CNBC yesterday he was short WWE. He's certainly not alone in his skepticism. At present, roughly one-quarter of the stock's float is sold short, and would take more than 12 sessions to cover, at WWE's average daily pace of trading.

On the fundamental front, World Wrestling Entertainment, Inc. (NYSE:WWE) is scheduled to report quarterly earnings before the open next Thursday, Oct. 30. The stock's post-earnings price action tends to side with bulls, and over the past four quarters, WWE has gained an average of 6.1% in the session subsequent to reporting. For the company's third-quarter, Wall Street is calling for a per-share loss of 17 cents.


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