Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Tracking Pre-Earnings Bets on Sirius XM Radio Inc (SIRI)

Weekly call options popular as SIRI flirts with new high

by 10/9/2013 11:38 AM
Stocks quoted in this article:

Sirius XM Radio Inc (NASDAQ:SIRI) was among the few bright spots in the market yesterday. The shares eased to another new six-year high, hitting the $4.00 mark for the first time since February 2007. In response -- and in anticipation of the satellite radio company's upcoming earnings report -- options traders are active today on the call side of the fence. In early trading, call volume is running 8% hotter than a typical day.

Most active is the weekly 11/1 3.50-strike call, where a number of mid-sized blocks traded in rapid succession just after the opening bell. These blocks changed hands at the ask price, as have 98% of all the 2,000-plus contracts trading here. Volume easily trumps open interest of 103 contracts, and implied volatility has risen 4.3 percentage points, all pointing to the initiation of new short-term bullish bets.

In order for these calls to turn a profit at expiration in just over three weeks, SIRI will need to be trading above $3.94, or the strike price plus the volume-weighted average price of $0.44. If SIRI tumbles from its present perch of $3.86 to slip below the strike price, the maximum potential loss for today's call buyers is 100% of the premium paid.

Between now and expiration, SIRI will report third-quarter earnings before the open on Oct. 24. The company's earnings track record is far from flawless; SIRI has matched analysts' expectations on five occasions, exceeded them twice, and missed once in the past two years. Still, the stock has managed to gain an average of 1.3% in the day after earnings hit the Street.

As earnings approach, speculating with Sirius XM Radio Inc (NASDAQ:SIRI) options has become a pricier undertaking. Specifically, the equity's 30-day, at-the-money implied volatility (IV) has surged from 29.8% on Sept. 25 to 39% today. What's more, IV for the aforementioned weekly call stands at 51.2%, versus SIRI's 20-day historical volatility of 24.3%.

Option Briefs offer a concise look at recent notable trading activity. For more in-depth coverage of securities from an Expectational Analysis perspective, please visit our Trading Floor Blog section.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.