Schaeffer's Options Center

Kohl's Corporation (KSS) has been struggling lately. In the past 60 sessions, KSS has underperformed the broader S&P 500 Index (SPX) by over six percentage points. The retailer has been range-bound in the $46 to $50 neighborhood since June, with the upper rail of this range reinforced by KSS' 20-week trendline. This intermediate-term trendline has capped all of the retail stock's rally attempts since May.

Put shoppers have flocked to KSS today, with over 9,000 of these bearish bets changing hands -- four times the stock's expected single-session put volume of just 2,000 contracts.

The October 49 put takes today's "top option" award, with 4,510 contracts crossing the tape -- 91% of which traded at the ask price, indicating they were likely purchased. With today's volume vastly exceeding open interest at this strike, it seems the bulk of these puts are fresh positions. By buying to open the October 49 put, traders are counting on KSS to backpedal beneath the $49 level over the next several weeks. KSS is currently trading at $49, making these puts right at the money.

Contrary to today's bearish activity, option players have rarely been more optimistic toward KSS, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.85, which falls just six percentage points shy of an annual bullish peak.

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Tech device diva NetApp Inc. (NTAP) has put in an impressive performance in 2010, adding over 30% year-to-date. Since February the stock has been barreling higher along support from its 32-week trendline, which has led NTAP to form a series higher highs and higher lows. In fact, just today NTAP touched a new 52-week high of $47.00.

Option players have responded enthusiastically to NTAP's technical feat, with some 19,000 calls changing hands so far today -- triple the tech stock's expected single-session call volume of around 6,100 contracts.

The September 48 call has been wildly popular, with 4,360 contracts traded at this strike -- the majority of which changed hands at the ask price, indicating they were likely purchased. With just 261 contracts currently open at this strike, it appears that the bulk of these calls are newly added. By buying to open the September 48 call, traders are counting on NTAP's rally to continue past the $48 level.

Elsewhere on the Street, short interest fell by 3.1% during the past two weeks, and now accounts for 4.9% of NTAP's total available float. Given the stock's recent rally, the shorts were likely rushing to cover, rather than taking profit on their positions. As NTAP continues its uptrend, an unwinding of these remaining bearish bets could help push the shares even higher.

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Beginning Oct. 11, Green Mountain Coffee Roasters Inc. (GMCR) said it will boost prices on all K-Cup portion packs for its Keurig Single Cup brewing system sold in North America. Investors have responded extremely well to the news, with the shares of GMCR up more than 7% at last check.

Also responding to the scheduled price increase – and the stock's subsequent price action – are options traders, with intraday volume already exceeding the java giant's expected single-session activity. More specifically, GMCR has already seen roughly 16,000 calls and 7,800 puts change hands, compared to its predicted daily volume of about 2,300 calls and 1,500 puts. In fact, digging deeper into the data indicates that some of the call and put activity is related in the form of a synthetic short stock position.

Around midday, one investor bought 500 October 31 puts for the ask price of $0.85 per contract, and simultaneously sold a symmetrical block of October 35 calls for the bid price of $1.27 per contract, resulting in a net credit of $0.42 per pair of options. By employing different-strike options for the strategy, the trader can bet bearishly on the shares of GMCR without selling them short, allowing for more wiggle room in his profit/loss calculations.

However, from a technical standpoint, an intermediate-term retreat south of the $31 level may not be in the cards for GMCR. In fact, the shares are currently knocking on the door of all-time-high territory, with the equity trading at $33.81 – just 17 cents from a fresh record peak.

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The New York Times Company (NYT) has been a favorite target among call speculators today, with some analysts attributing the unusual options activity to unsubstantiated takeover talk. So far today, the media mogul has seen roughly 5,700 calls cross the tape – more than five times the number of NYT puts traded, and around 92 times its predicted single-session call volume.

Attracting the bulk of the attention has been the out-of-the-money October 9 call, which has seen close to 4,200 contracts change hands on open interest of just five contracts – pointing to the initiation of fresh positions. Plus, 60% of the back-month calls have traded closer to the ask price, suggesting they were bought. By purchasing the October 9 calls to open, the buyers are betting the shares of NYT will surmount the $9 level before the options expire.

Taking a broader look at NYT's sentiment set-up, we find that calls are already the options of choice among near-term traders. In fact, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.20 implies that calls are five times more prevalent than puts among options with less than three months to expiration. What's more, the stock's SOIR stands higher than just 18% of all others taken during the past year, indicating that short-term speculators have rarely been more optimistically aligned toward NYT.

At last check, the shares of NYT have rallied roughly 3.9% to hover just north of the $8 level.

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Call volume soared to five times the norm on Teva Pharmaceutical Industries Ltd (TEVA) on Tuesday, with roughly 33,000 of these bullishly oriented options changing hands.

Tuesday's heavy call volume is a deviation from the norm for TEVA, which currently sports a 10-day International Securities Exchange (ISE) put/call volume ratio of 1.32. This ratio ranks higher than 96% of all other readings taken during the past year, indicating that traders on the ISE have been initiating bearish bets on TEVA at near-peak levels lately.

However, turning to Tuesday's activity, it seems that one bullish trader upped his position on TEVA. Late Tuesday afternoon, 400 September 50 calls, marked "spread," traded at the bid price, while 400 October 52.50 calls, also designated "spread," changed hands at the ask price. Open interest at the 50 strike fell overnight, while the 52.50 strike saw an increase in short interest overnight.

By rolling this September 50 call position up and out to the October 52.50 call, this trader is betting on continued gains for TEVA during the next two months. However, with TEVA currently trading around $54.14, these 52.50-strike calls are already in the money.

TEVA has been trekking steadily higher for the past several weeks, and recently regained the support of its 10-week and 20-week moving averages. As the pharmaceutical concern continues its uptrend, an unwinding of bearish sentiment could help fuel the shares even higher.

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On Monday, Raymond James raised its outlook on The Cheesecake Factory Incorporated (CAKE) from "market perform" to "outperform." This bullish brokerage note is relatively rare for CAKE, as 18 of the 27 analysts currently following the company call it a "hold" or worse, according to Zacks.

Option players, too, maintain a bearish bias toward CAKE, as indicated by the stock's Schaeffer's put/call open interest ratio (SOIR) of 2.12, which reveals that put open interest more than doubles call open interest among options in the front three months. This ratio ranks above 67% of all other readings taken during the past year, pointing at a pessimistic slant among short-term traders.

However, on Tuesday it seems that one trader took a more neutral approach to CAKE. Late yesterday afternoon, 3,000 October 25 puts and 3,000 October 26 calls, both marked "spread," changed hands at their respective bid prices. Open interest at each strike increased substantially overnight, pointing to the initiation of a short strangle on CAKE.

Essentially, a short strangle strategist is betting that stock will remain "strangled" between the two sold strikes until October expiration. In other words, our trader is counting on CAKE to hover between the $25 and $26 levels over the next two months. The restaurant chain is currently trading around $25.72.

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