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Options Radar: Brightcove Inc, Cerner Corporation, and Deckers Outdoor

Reviewing notable options activity on Brightcove Inc, Cerner Corporation, and Deckers Outdoor Corp

by 7/25/2014 12:33 PM
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Three stocks seeing notable options activity today are cloud-based solutions provider Brightcove Inc (NASDAQ:BCOV), health care IT issue Cerner Corporation (NASDAQ:CERN), and footwear designer Deckers Outdoor Corp (NYSE:DECK). Here's a look at how today's options traders have been placing their bets on these three names.

  • Brightcove Inc (NASDAQ:BCOV) is crashing today, down 36.7% at $6.50, and fresh off a new annual low of $6.06. Precipitating the swoon was the company's trip to the earnings confessional last night, where -- despite posting a narrower-than-expected second-quarter loss -- BCOV disappointed with its third-quarter and full-year guidance. The result was a rush of downgrades and price-target reductions from firms such as B. Riley and RBC, among others. With the shares landing on the short-sale restricted (SSR) list this morning, traders are piling into BCOV's options pits -- especially on the put side, where volume is running at 402 times the intraday average. The stock's 30-day at-the-money (ATM) implied volatility (IV) has also spiked by 14.7% to 70.2%, signaling strong demand for short-term options -- and making now a good time to sell premium on the equity. Accordingly, it appears one individual sold to open a block of 10,000 deep out-of-the-money (OOTM) August 5 puts earlier, possibly assuming the worst is already over for Brightcove, and future downside limited.

  • Meanwhile, Cerner Corporation (NASDAQ:CERN) has gained 1.9% to trade at $56.67, following a solid showing in the earnings confessional last night. Specifically, the firm matched the Street's second-quarter per-share earnings estimate, topped the consensus revenue projection, and lifted its full-year outlook. In CERN's options pits, total activity is running at six times the typical intraday clip. Most active is the August 60 call, which bullish speculators are buying to open to take aim at additional short-term upside in the shares.

  • Finally, Deckers Outdoor Corp (NYSE:DECK) is popping today, up over 4% to rest near $88.90. Earlier, in fact, the shares hit a fresh two-year high of $94.80, in the wake of last night's slimmer-than-expected fiscal first-quarter loss, and a string of bullish brokerage notes from Canaccord Genuity, Credit Suisse, ISI Group, and Jefferies. In options land, total volume is nine times what's expected at this point in the session, and traders are apparently selling premium on the deep OOTM September 55 put. Meanwhile, it looks like a few eleventh-hour bulls are buying to open the weekly 7/25 94-strike call, amid hopes for even higher highs for DECK.


Micron Technology, Inc. (MU) Bulls Target More Upside

Micron Technology, Inc.'s September 28 call is being bought to open today

by 7/25/2014 10:46 AM
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Micron Technology, Inc. (NASDAQ:MU) call players have been active this week, which isn't too surprising, given the stock's roughly 154% year-over-year advance. In today's session, conservative option bulls are buying to open the equity's in-the-money (ITM) September 28 call, as they gamble on extended gains for the semiconductor stock over the next two months.

Today's traders are paying a volume-weighted average price (VWAP) of $5.86 for the calls, making breakeven at the close on Friday, Sept. 19 -- when back-month options expire -- $33.86 (strike plus VWAP). Gains will accumulate north of here, while losses are capped at 100% of the premium paid, should MU settle south of the strike at expiration. At last check, the security was sitting just south of breakeven at $33.67.

As noted, these call buyers are playing it safe by buying to open such a deep ITM strike. In fact, delta on the call is docked at a lofty 0.89, suggesting an 89% chance the option will expire in the money. What this also means is that for every point Micron Technology, Inc. (NASDAQ:MU) adds through September options expiration, the value of this call will increase 0.89 point. Conversely, for every point the equity loses over the next eight weeks, the call's value will decrease by 0.89 point.


Most Active Options Update: KB Home (KBH)

KB Home attracts call buyers as the stock pulls back to support

by 7/25/2014 10:09 AM
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The 20 stocks listed in the table below are the S&P 400 MidCap Index (MID) components that 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 morning is KB Home (NYSE:KBH), which was heavily targeted by call buyers on Thursday.

Most Active Options Table - MID

Shares of KB Home dropped 3.3% yesterday, pressured by a steep decline in home sales in June. As KBH tumbled, option volume ramped up to 1.76 times the expected level, and 30-day at-the-money implied volatility on the stock jumped 15.9% to close at 28.9%.

The day's most active KBH strike was the August 17 call, where 6,937 contracts were exchanged. Most of these calls changed hands at the ask price, suggesting they were bought, and open interest rose overnight by more than 6,200 contracts. Additionally, data from the International Securities Exchange (ISE) confirms that new bullish bets were added at this strike on Thursday.

By purchasing August 17 calls, options players are betting on KBH to extend its lead above $17 over the next few weeks. The calls were purchased at a volume-weighted average price (VWAP) of $0.91, so breakeven at expiration will be $17.91 (strike price plus VWAP). Shares of KBH are currently down 1.4% at $17.47, so they're about 2.5% away from this breakeven mark.

Yesterday's call buyers could be looking for KB Home (NYSE:KBH) to bounce from support in the $17.50 area, but any rebound could be short-lived. The stock's 80-week moving average, which has capped rally attempts since late March, is currently docked at $18.48.


McDonald's Corporation (MCD) Traders Eye the Century Mark

McDonald's Corporation option traders aren't deterred by recent fundamental follies

by 7/25/2014 10:06 AM
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The fallout from the McDonald's Corporation (NYSE:MCD) expired-meat scandal continued yesterday, as the restaurateur announced it has pulled Chicken McNuggets from its Hong Kong locations. Nevertheless, that didn't prevent one group of option bulls from targeting intermediate-term gains in the stock.

Diving right in, MCD's most active strike by far on Thursday was the out-of-the-money October 100 call, where more than 3,800 contracts were exchanged. The majority traded at the ask price, and open interest added nearly 3,000 positions overnight, hinting at newly minted bullish bets. By purchasing the calls for a volume-weighted average price (VWAP) of $0.56, the speculators are banking on MCD shares to topple breakeven at $100.56 (strike plus VWAP) by October options expiration. Additional gains will accrue north of here, while risk is capped at the initial premium paid, should the stock finish below the strike at expiration.

On the charts, McDonald's Corporation (NYSE:MCD) has been tumbling since mid-May, when the shares hit an all-time high of $103.78. Of course, this downtrend has only intensified in recent sessions, due to the aforementioned scandal, as well as Tuesday's second-quarter earnings miss and subsequent bearish brokerage attention. However, the shares are little changed this morning, off a penny at $95.34.


Lululemon Athletica inc. Halo Lift Sparks a Rush of Option Activity

Lululemon Athletica inc. calls and puts are trading at accelerated levels today

by 7/24/2014 2:41 PM
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Lululemon Athletica inc. (NASDAQ:LULU) is getting a halo lift today from sector peer Under Armour Inc (NYSE:UA), with shares of LULU up 4.8% at last check to trade at $39.37. In the stock's options pits, overall volume is trading at more than two times the average intraday pace, and all 10 of the most active contracts expire within the next two months. Against this accelerated demand for short-term options, LULU's 30-day at-the-money implied volatility (IV) has jumped 3.8% to 34.1%.

On the call side, the August 40 and 45 strikes have seen the most action. Diving deeper reveals that two symmetrical blocks totaling 2,600 contracts changed hands at the same time, suggesting the action was related. However, with IV lower at each leg, and open interest sufficient to cover volume, it's entirely possible this trader is closing out a previously initiated call spread on LULU.

Meanwhile, on the put side, the stock's September 37.50 strike is the most active. More than 1,700 contracts have changed hands here at a volume-weighted average price (VWAP) of $2.17. The majority traded at the ask price and IV is higher, pointing to the purchase of new positions. At-expiration breakeven at the close on Friday, Sept. 19 -- a time frame that encompasses LULU's quarterly earnings report -- is $35.33 (strike less VWAP). Gains will accumulate on a move down to zero, while losses are limited to 100% of the premium paid, should the equity finish north of the strike at expiration.

Speaking of earnings, Lululemon Athletica inc. (NASDAQ:LULU) is slated to step into the earnings confessional on Thursday, Sept. 11. The stock's post-earnings price action over the past eight quarters tends to side with the bears, as LULU has averaged a loss of 2.9% in the session subsequent to its report -- including a nearly 18% slide last June. For the yoga apparel maker's second quarter, Wall Street is calling for a per-share profit of 29 cents -- a dime less than what the company banked one year ago.


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