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Pre-Earnings Traders Show Confidence In NQ Mobile Inc (ADR) (NQ)

NQ Mobile Inc (ADR) tends to make sharp moves following earnings

by 10/20/2014 2:12 PM
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NQ Mobile Inc (ADR) (NYSE:NQ) is nearly 8% higher this afternoon to trade at $9.06, and options traders have responded. At last check, calls are changing hands at double the usual intraday pace, and puts are crossing at nine times what's expected .

Digging deeper, however, it appears many of the put traders aren't of the "vanilla" variety. Instead, at NQ's most active strike -- the deep out-of-the-money November 6 put, where roughly 2,500 contracts are on the tape -- speculators are selling to open contracts. This theory is underscored by data from Trade-Alert. In other words, these put writers are gambling on the equity to remain above $6 from now through the close on Friday, Nov. 21, when the newly front-month options expire.

On the charts, NQ has had a rough 2014, surrendering 38.5% of its value. In fact, the stock was below the aforementioned strike as recently as Sept. 23.

Turning to the future, NQ Mobile Inc (ADR) (NYSE:NQ) is scheduled to step up to the earnings mic sometime in mid-November. The shares tend to make big moves following these quarterly events (and in general, too). Over the past eight quarters, the stock has swung an average of 7.6% the day after reporting, including a 20.6% loss in April.


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Options Radar: Keurig Green Mountain Inc, Netflix, and Cirrus Logic

Reviewing notable options activity on Keurig Green Mountain Inc, Netflix, Inc., and Cirrus Logic, Inc.

by 10/20/2014 2:02 PM
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Three stocks seeing notable options activity today are java giant Keurig Green Mountain Inc (NASDAQ:GMCR), streaming issue Netflix, Inc. (NASDAQ:NFLX), and integrated circuit specialist Cirrus Logic, Inc. (NASDAQ:CRUS). Here's a look at how today's options traders have been placing their bets on GMCR, NFLX, and CRUS.

  • GMCR is starting the week out with a bang -- up 3.4% to trade at $142.41. Today's positive price action is just more of the same for a stock that's tacked on more than 88% year-to-date, and more recently, outperformed the broader S&P 500 Index (SPX) by 19.7 percentage points over the past three months. In the options pits, though, put volume is trading at 1.5 times the typical intraday amount, and GMCR's 30-day at-the-money implied volatility has surged 11.6% to 46.3%, signaling elevated demand for short-term options. Drilling down, buy-to-open activity has been detected at Keurig Green Mountain Inc's weekly 10/31 132-strike put, as traders gamble on retreat for the shares through next Friday's close -- when the series expires.

  • Amid NFLX's steep 21% decline last week, the stock's 14-day Relative Strength Index (RSI) slid to 22 -- in oversold territory. This may explain why the security has bounced 1.5% today to trade at $362.63, or traders could just be cheering the company's newest collaboration. Regardless, option volume is running at a slightly accelerated pace, and all 10 of Netflix, Inc.'s most active options expire at this Friday's close. The equity's weekly 10/24 365-strike call has seen the most action, and is being bought to open for a volume-weighted average price (VWAP) of $7.08.

  • It could be a volatile two weeks for shares of CRUS. Specifically, Apple Inc. (NASDAQ:AAPL) -- from which Cirrus Logic, Inc. gets roughly 80% of its revenue -- will report earnings after tonight's close. Additionally, CRUS will take its own turn in earnings confessional after the close next Wednesday, Oct. 29. Over the past four quarters, the stock has averaged a single-session post-earnings loss of 4.1% -- including a nearly 14% plunge last October. Today, however, the equity is trading higher, and was last seen up 4.5% at $21.02. As such, call volume has soared to five times what's typically seen at this point in the day, and a number of speculators are betting on the security to extend today's positive price action through week's end. Specifically, speculators are buying to open CRUS' weekly 10/24 21-strike call for a VWAP of $0.39.

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Most Active Options Update: Apple Inc. (AAPL)

Apple Inc. option traders are gambling on an earnings win

by 10/20/2014 1:18 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 today is tech titan Apple Inc. (NASDAQ:AAPL), which will unveil its highly anticipated quarterly earnings report after the close.

Most Active Options Table

Apple Inc. is 1.7% higher at $99.35, as traders react to the launch of Apple Pay and buy in ahead of earnings. Over the past eight quarters, AAPL has moved an average of 5% in the session subsequent to reporting, mostly to the downside. In fact, the equity has reacted negatively in five of the past eight quarters, resulting in an average one-day post-earnings loss of 1%. Nevertheless, option traders today are scooping up AAPL calls at a faster-than-usual clip.

So far, roughly 520,000 AAPL calls have changed hands -- more than twice the number of puts traded, and representing a 37% mark-up to the stock's average intraday call volume. In fact, the 10 most active strikes are calls expiring on or before Friday, Nov. 21.

Digging deeper, it appears some "vanilla" bulls are buying to open the weekly 10/24 103- and 104-strike calls, where implied volatility has popped by double-digit percentage points, and most of the calls have crossed on the ask side.

Digging deeper, however, it looks like one trader is taking a cautiously optimistic stance ahead of earnings, initiating a bull call spread at the weekly 10/24 102 and 103 strikes. Specifically, the speculator bought to open 1,861 102-strike calls for $0.77 apiece, then hedged her bets by simultaneously selling to open an equal amount of 103-strike calls for $0.53 each -- data confirmed by the International Securities Exchange (ISE) -- resulting in a net debit of $0.24 per pair of contracts.

The trader will make money if AAPL surpasses $102.24 (bought strike plus net debit) by Friday's close, when the options expire. However, her reward maxes out at $0.76 (difference between strikes, minus net debit) no matter how far AAPL should climb north of $103 this week.

Had the speculator simply bought the 102-strike calls, breakeven would be higher at $102.77 (strike plus premium paid), and gains would be theoretically unlimited to the upside. However, the trader would be risking the full $0.77 paid for the calls, as opposed to the maximum risk of $0.24 (the net debit) on the spread.

On the charts, AAPL has struggled to conquer the $102-$103 region, which emerged as a speed bump in mid-to-late August. Furthermore, the stock is now staring up at its formerly supportive 10-week moving average (located at $100.33), which could switch roles to act as resistance.

Despite the stock's technical turmoil, or its fundamental woes both in and out of the earnings spotlight, Apple Inc. (NASDAQ:AAPL) remains beloved by analysts. In fact, the security boasts 22 "strong buys" and five "buy" endorsements, compared to six lukewarm "holds" and not a single "sell." Plus, the consensus 12-month price target on the equity sits in uncharted territory at $112.64. Another negative earnings reaction could exacerbate recent selling pressure on the iParent.


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NCR Corporation (NCR) Traders Roll the Dice On a Rebound

NCR Corporation is reeling on preliminary quarterly numbers and a disappointing FY outlook

by 10/20/2014 1:13 PM
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NCR Corporation (NYSE:NCR) has plunged 22% this afternoon to churn around $23.30 -- its biggest one-day drop on record -- after reducing its third-quarter earnings guidance and full-year outlook. In fact, the shares earlier hit a nearly two-year low of $22.83, and found a place on the short-sale restricted (SSR) list. Elsewhere, options are trading at triple the anticipated intraday rate, and the stock's 30-day at-the-money implied volatility has shot 7.3% higher to 46.2%, signaling elevated demand for short-term strikes.

Most active so far is NCR's January 2015 25-strike call, where 1,432 contracts have been exchanged. The majority have crossed at the ask price, and open interest is home to fewer than 100 contracts, suggesting the initiation of long call positions. In short, these traders expect NCR to rebound above the quarter-century mark by January 2015 options expiration.

As alluded to, NCR Corporation (NYSE:NCR) released preliminary third-quarter numbers earlier, and will issue its official results after the close next Tuesday afternoon. Elsewhere, in the wake of today's price action, Oppenheimer slammed the shares with a $10 price-target cut to $30, but nonetheless retained its "outperform" rating.


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Most Active Weekly Options: Facebook Inc (FB)

Facebook Inc option traders gamble on end-of-week downside

by 10/20/2014 12:37 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 Facebook Inc (NASDAQ:FB), as option traders roll the dice on an end-of-week retreat.

Most Active Weekly Options Table

Facebook Inc is trading 1.1% higher today to linger near $76.78, following reports King Digital Entertainment PLC (NYSE:KING) is planning to launch its new "Candy Crush" game on FB and smartphones in coming weeks. Option traders aren't buying today's positive price action, though, and are scooping up puts at a faster-than-usual clip.

Drilling down, FB's weekly 10/24 75-strike put has garnered the most attention, with 18,265 contracts on the tape at last check. The majority of these puts have traded at the ask price, implied volatility has jumped 9.9 percentage points, and fewer than 3,400 contracts are currently in residence here. Summing it all up, it appears new positions are being purchased.

By initiating the long puts, traders are expecting FB to breach the $75 mark by week's end -- when the weekly series expires. The options market isn't too confident the put will be in the money at Friday's close, as delta on the option is docked at negative 0.30.

Looking ahead, Facebook Inc (NASDAQ:FB) is slated to take its turn in the earnings confessional after the close next Tuesday, Oct. 28. While this scheduled event resides outside of the lifetime of the aforementioned puts, today's bearish bias echoes the withstanding trend witnessed in FB's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 0.74 ranks higher than all other readings taken in the past year. This, despite the fact that FB has averaged a single-session post-earnings gain of 5.2% over the past four quarters.


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