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Micron Technology, Inc. (MU) Option Traders Make a Gutsy Call

Micron Technology, Inc.'s July 31 call is being bought to open today

by 4/23/2014 3:05 PM
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Option Brief: Micron Technology, Inc. (NASDAQ:MU) has been on a tear over the past 52 weeks, with the shares up nearly 178% to trade at $26.17. This positive price action has been in full swing this week, with MU notching a series of higher highs. In today's session, specifically, the stock tagged the $26.46 mark -- its loftiest perch since May 2002. Unlike yesterday's option activity -- which saw a put imbalance despite the stock's strength (40,000 puts were initiated, versus 25,000 calls) -- calls have the edge over puts by a more than 2-to-1 margin today. Diving deeper reveals a number of speculators either betting on another bold move to the upside -- or hedging against one.

The most active strike of the session is MU's July 31 call. The majority of the 7,779 contracts traded here have done so at the ask price, implied volatility has ticked higher, and volume outstrips open interest, collectively inferring the purchase of new positions.

Considering it's been roughly 12 years since MU has traded north of $31, delta for the call is docked at 0.22, implying a roughly 22% chance the position will be in the money at the close on Friday, July 18, which is when the options expire. Risk for today's call buyers is limited to the initial premium paid. According to Trade-Alert, the volume-weighted average price for the calls is $0.60.

This bullish positioning among option traders isn't surprising, considering MU's withstanding technical strength. However, although short interest dropped 5.7% in the latest reporting period, nearly 12% of the stock's float is still sold short. In light of this, a portion of the activity at the deep out-of-the-money July 31 call could be a result of shorts hedging against any additional upside. Meanwhile, from a contrarian perspective, a continued unwinding of these bearish bets in the face of the stock's upward momentum could help fuel Micron Technology, Inc.'s (NASDAQ:MU) fire.


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Option Clips: SodaStream International, Starbucks, and Zynga

Reviewing notable options activity on SodaStream International Ltd, Starbucks Corporation, and Zynga Inc

by 4/23/2014 2:16 PM
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Two equities generating buzz on StockTwits today are carbonated beverage provider SodaStream International Ltd (NASDAQ:SODA) and java giant Starbucks Corporation (NASDAQ:SBUX). Meanwhile, social networking concern Zynga Inc (NASDAQ:ZNGA) is seeing some pre-earnings options action. Here's a look at how traders have been aligning their speculative bets today.

  • SodaStream International Ltd (NASDAQ:SODA) is 14.2% higher at $46.10, amid reports that Starbucks Corporation is in advanced talks to acquire a 10% stake in the firm. Overall options volume is running at six times the normal intraday pace, with calls the options of choice. Roughly 23,000 SODA calls have changed hands, compared to 18,000 puts. Digging deeper, it appears speculators are buying to open the weekly 4/25 45-strike call, amid hopes that SODA will extend its journey north of $45 through the end of the week, which represents the option's lifetime.

  • Starbucks Corporation (NASDAQ:SBUX), on the other hand, has tumbled 0.7% on the news, and was last seen flirting with $70.67. The stock's 30-day at-the-money (ATM) implied volatility (IV) is 3.1% higher at 26.1%, with demand for short-term options elevated ahead of the company's turn in the earnings confessional tomorrow night. However, calls have a slight advantage over puts, with roughly 5,400 of the former traded, compared to fewer than 4,100 of the latter. In fact, the most popular option thus far is the May 77.50 call, which expire at the close on Friday, May 16.

  • Finally, Zynga Inc (NASDAQ:ZNGA) has surrendered 2.4% ahead of tonight's earnings release, and was last seen around $4.47. Puts remain popular, with about 18,000 contracts exchanged -- a 78% mark-up to the stock's intraday average. Furthermore, the stock's 30-day ATM IV is 5.8% higher at 76.4%, and its Schaeffer's Volatility Index (SVI) of 74% stands higher than 62% of all other readings from the past year, suggesting ZNGA's short-term options are slightly more expensive than usual, from a volatility standpoint. Digging deeper, the security's weekly 4/25 4-strike put is most popular today, with close to 7,200 contracts exchanged. Two-thirds of the puts traded on the ask side, and IV has skyrocketed, hinting at newly bought bearish bets. The puts will be in the money if ZNGA is sitting south of $4 at options expiration Friday night, but the option's delta of negative 0.18 reflects a less than 1-in-5 shot of an in-the-money finish.

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JA Solar Holdings Co., Ltd. (ADR) (JASO) Option Sellers Stay Busy

Traders may be employing a covered call strategy on JA Solar Holdings Co., Ltd. (ADR)

by 4/23/2014 1:10 PM
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JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) call volume is running at six times the average intraday pace this afternoon, despite a lack of notable news drivers. Of the roughly 12,000 contracts on the tape, more than 10,300 have crossed at the May 12 call, which has caught the attention of option sellers.

Diving into the details, 80% of the contracts at the front-month JASO strike -- including blocks of 4,000 and 3,000 -- have changed hands at the bid price, indicating seller-driven action. Also, volume has easily surpassed the 816 contracts in open interest, and information from the International Securities Exchange (ISE) confirms the aforementioned lots were, in fact, sold to open.

By writing the calls, the traders anticipate JASO shares -- currently 0.4% lower at $10.93 -- will remain at or below $12 through the closing bell on Friday, May 16, when front-month options expire. If the solar stock surges past the strike within the option's lifetime, however, the sellers may be assigned, and forced to deliver the shares for $12 apiece, no matter how much they're worth.

Given the stock's year-to-date gain of more than 19%, it's possible that today's sold calls are covered, which means the traders are stockholders who own a sufficient number of shares to satisfy any potential assignment obligations. (In the case of the 4,000-contract block, this would be a hefty 400,000 shares.) If this is the case, the sellers' primary goal is to supplement income in the event of lackluster price action in the near term, but ultimately hold on to their JASO shares to exploit any long-term gains.

Taking a step back, call selling has been a popular play in JA Solar Holdings Co., Ltd.'s (ADR) (NASDAQ:JASO) options pits lately. Specifically, on the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has seen more than 5,200 calls sold to open in the last 10 trading days, versus fewer than 2,000 bought to open.


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Most Active Options Update: Twitter Inc (TWTR)

Twitter Inc is seeing a rare uptick in put activity today

by 4/23/2014 12:37 PM
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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 this afternoon is Twitter Inc (NYSE:TWTR).

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Twitter Inc has been on the decline during the past couple of months, down more than 30% in the wake of its post-earnings bear gap in early February. Yesterday, the equity tried to stage a rebound, but this was quickly contained by its descending 32-day moving average. In today's session, the equity has resumed its downtrend -- last seen 0.3% lower at $45.88 -- causing puts to outpace calls, a rare occurrence in the equity's options pits.

By the numbers, around 15,000 puts have changed hands thus far, compared to 11,000 calls. The most active position is TWTR's weekly 4/25 45.50-strike put. Of the 4,760 contracts traded here, 88% have gone off at the ask price, signaling buyer-driven activity. What's more, implied volatility has shot 10.9 percentage points higher, and volume outstrips open interest, suggesting new positions are being initiated. Although TWTR breached the strike price earlier today, the put's delta is perched at negative 0.44, suggesting a roughly 44% chance of an in-the-money finish at this Friday's close, which is when the weekly options expire.

As mentioned, today's put-skewed session bucks the recent trend witnessed in Twitter's options arena. Specifically, over the past 10 sessions on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 58,696 calls on TWTR, compared to 39,953 puts, resulting in a call/put volume ratio of 1.47.

On the fundamental front, Twitter Inc (NYSE:TWTR) is slated to report quarterly earnings after the market closes on Tuesday, April 29. Although this scheduled event falls outside the lifetime of the aforementioned puts, it is worth noting that the equity shed more than 24% in the session following its early February announcement.


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Bank of America Corp (BAC) Trader Rolls the Dice On More Upside

Bank of America Corp's May 15 calls were rolled up and out this morning

by 4/23/2014 11:23 AM
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Calls have been the options of choice on Bank of America Corp (NYSE:BAC) in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 10 sessions, in fact, speculators have bought to open nearly five calls for each put on BAC. What's more, the resulting call/put volume ratio of 4.67 ranks in the 83rd percentile of its annual range, meaning long calls have been initiated over puts at a faster-than-usual clip.

It's more of the same in today's session, where calls are outpacing puts by a more than 6-to-1 margin. More than half of the day's intraday call volume comes at the hands of one speculator who appears to be upping the bullish ante on her outlook for the banking stock. Right out of the gate, one block of 10,000 May 15 calls changed hands at the same time a lot of 15,000 November 16 calls crossed the tape. Trade-Alert suggests the former were sold to close, while the latter were bought to open. In other words, this trader is rolling her bullish bet up one strike and out six months or so (and increasing the size of the wager), hoping for an additional rise for BAC.

With BAC trading near $16.33, the November calls are currently in the money. Based on the $1.31 premium paid for the calls, however, breakeven at expiration on Friday, Nov. 21, is $17.31 (strike plus the premium paid). Risk, meanwhile, is limited to the initial cash outlay, should BAC fail to maintain its perch atop $16 over the next several months.

On the charts, BAC has performed well in the long term, with the shares up about 35% year-over-year. More recently, the equity has been in a short-term slump since hitting a nearly four-year high of $18.03 in late March, off around 9.4%. This decline has been highlighted by the stock's 10-day moving average, which is becoming a key player in today's price action. Specifically, after closing above this trendline yesterday for the first time since April 1, Bank of America Corp (NYSE:BAC) is extending its lead north of here, possibly suggesting this former layer of resistance could now be switching to a more supportive role.


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