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Bulls and Bears Target Micron Technology, Inc. (MU) Ahead of Earnings

Micron Technology, Inc. will report earnings after next Thursday's close

by 9/16/2014 10:05 AM
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Micron Technology, Inc. (NASDAQ:MU) option volume traded at two times the average daily pace on Monday, with both calls and puts seeing accelerated demand. With the company slated to take the earnings stage next week, short-term contracts were especially popular, as evidenced by MU's 30-day at-the-money implied volatility, which jumped 14% to 51.8% -- in the 78th annual percentile.

Specifically, near-term traders set their sights on the $28 mark, with the October 28 call and put garnering the most attention. In fact, north of 21,200 contracts collectively changed hands at these back-month strikes -- mostly at the ask price, signaling buyer-driven activity. IV edged higher at both strikes, and open interest rose overnight, making it safe to assume new positions were initiated.

The options market seems more confident that the calls will be in the money when the contracts expire at the close on Friday, Oct. 17, as the option's delta is currently perched at 0.72. Conversely, delta for the out-of-the-money puts was last seen docked at negative 0.28.

Technically speaking, Micron Technology, Inc. (NASDAQ:MU) has been a standout, with the shares boasting an 82% year-over-year advance. Although the stock succumbed to a sell-off in the tech sector on Monday, MU has resumed its longer-term uptrend today -- last seen 1.9% higher at $30.58. What's more, if past is prologue, the equity could gain additional momentum when the company unveils its fiscal fourth-quarter earnings report after next Thursday's close. Following its last turn in the confessional in June, the stock tacked on 4% in the subsequent session, which widened to a 5.4% gain going out one week.


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Caterpillar Inc. (CAT) Option Traders Eye Short-Term Upside

Caterpillar Inc.'s call volume exploded yesterday

by 9/16/2014 10:03 AM
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Caterpillar Inc. (NYSE:CAT) calls traded at a rapid-fire pace yesterday, with 25,000 contracts on the tape -- more than three times the expected single-session volume of 7,926. Short-term options were in demand, as well, per the construction equipment stock's 30-day at-the-money implied volatility, which jumped 8.5% to 16.6%.

Digging deeper, CAT's most active option was the out-of-the-money weekly 10/3 107-strike call, where nearly 5,600 contracts were exchanged. The majority traded at the ask price and open interest soared overnight, collectively suggesting buy-to-open activity.

Based on the calls' volume-weighted average price (VWAP) of $0.61, the traders expect CAT shares to rally above $107.61 (strike plus VWAP) by the close on Friday, Oct. 3, when the weekly series expires. Gains are theoretically unlimited north of this breakeven point, while losses are capped at the initial premium paid, should the shares settle below the strike at expiration.

Technically speaking, Caterpillar Inc. (NYSE:CAT) has had a strong year, up nearly 15% to trade at $104.19 -- despite being fractionally lower this morning. In fact, the stock traded above $107 for most of August, before a downgrade from BofA-Merrill Lynch dropped the shares below that level.


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Options Check-Up: Baidu Inc (ADR), El Pollo Loco Holdings, and AT&T

Analyzing recent option activity on BIDU, LOCO, and T

by 9/16/2014 8:04 AM
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Among the stocks attracting attention from options traders lately are Beijing-based Internet concern Baidu Inc (ADR) (NASDAQ:BIDU), restaurant operator El Pollo Loco Holdings Inc (NASDAQ:LOCO), and telecommunications titan AT&T Inc. (NYSE:T). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on BIDU, LOCO, and T.

  • BIDU fell 3.3% Monday to finish at $210.73, following other Chinese stocks into the red. Year-to-date, Baidu Inc (ADR) has gained 18.5%. Puts have been snagged at a faster-than-normal rate in the past 10 weeks, with the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.62 sitting only 5 percentage points away from an annual bearish peak. BIDU's Schaeffer's Volatility Index (SVI) is at 28%, falling in the 9th annual percentile, meaning short-term options are at a bargain price, historically speaking.

  • Wall Street freshman LOCO dropped 5% yesterday to finish at $36.98, as momentum names lost ground. However, the equity is still almost 95% higher since its IPO in late July. According to the equity's ISE/CBOE/PHLX 10-day call/put volume ratio of 1.73, calls are being purchased at nearly twice the rate of puts. El Pollo Loco Holdings Inc's SVI of 80% falls in the 58th percentile of its annual range, showing short-term options are pricing in fairly average volatility expectations.

  • T finished yesterday 0.6% higher at $34.69, climbing back atop its 200-day moving average. The equity's ISE/CBOE/PHLX 50-day put/call volume ratio of 1.37 stands in the 79th annual percentile, meaning puts are being purchased over calls at an above-average pace. T's SVI of 15% sits in the 46th percentile of its annual range, suggesting prices for short-term options are average.

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Will JetBlue Airways Corporation (JBLU) Continue to Stall Out?

JetBlue Airways Corporation's December 14 call is being sold to open today

by 9/15/2014 2:56 PM
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BofA-Merrill Lynch slapped JetBlue Airways Corporation (NASDAQ:JBLU) with a downgrade to "underperform" from "neutral" this morning, citing overly lofty expectations for a management change at the airline issue. As such, shares of JBLU are down 8% this afternoon, while option volume has soared to three times the average intraday pace. Against this accelerated demand, the stock's 30-day at-the-money implied volatility (IV) has jumped 10.9% to 36.9% -- in the 79th percentile of its annual range.

Most active is JBLU's December 14 call, where 5,620 contracts have crossed the tape thus far. However, the majority of these changed hands at the bid price, signaling seller-driven volume. IV is trending higher, and volume outstrips open interest, hinting at the initiation of new positions.

By selling the calls to open, traders are banking on JBLU staying south of $14 through the close on Friday, Dec. 19, when the options expire. In this best-case scenario, the calls will expire worthless, and the speculators can retain the initial credit collected as their full potential reward. Should the security rally north of the strike -- which is located 24.6% above the equity's current perch at $11.24 -- the traders could risk assignment, and face theoretically unlimited losses.

Heading into today's trading, JetBlue Airways Corporation (NASDAQ:JBLU) was enjoying a nearly 43% lead on the year. However, the $14 area capped the equity's advances in late 2006-early 2007, and the shares have not toppled this mark since. The options market isn't expecting this backdrop to change, with delta on the aforementioned call docked at 0.13, suggesting a slim 13% chance the option will be in the money at expiration.


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Options Radar: Ctrip.com, E-Commerce China Dangdang, and GoPro

Reviewing notable options activity on Ctrip.com International, Ltd. (ADR), E-Commerce China Dangdang Inc (ADR), and GoPro Inc

by 9/15/2014 1:56 PM
Stocks quoted in this article:

Three stocks seeing notable options activity today are online travel firm Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP), Beijing-based Internet merchant E-Commerce China Dangdang Inc (ADR) (NYSE:DANG), and camera maker GoPro Inc (NASDAQ:GPRO). Here's a look at how today's options traders have been placing their bets on these three names.

  • Ctrip.com International, Ltd. (ADR) (NASDAQ:CTRP) is off nearly 4% this afternoon at $61.57, but remains up 24% on a year-to-date basis -- helped last month by an investment from Priceline Group Inc (NASDAQ:PCLN). Activity has accelerated in the stock's options pits, where calls are trading at five times the intraday average, and short-term strikes are being targeted, per the equity's 30-day at-the-money (ATM) implied volatility (IV), which has popped 6% to 41.6%. Speaking of which, speculators are buying to open CTRP's in-the-money weekly 9/26 61-strike call, expecting the shares to move higher over the next couple of weeks. Meanwhile, longer-term option bulls are initiating long positions at the out-of-the-money (OOTM) December 65 call.

  • E-Commerce China Dangdang Inc (ADR) (NYSE:DANG) has given up 2.4% to rest near $12.66, but still boasts a nearly 33% year-to-date advance. In the options pits, traders are expecting the stock's longer-term uptrend to resume shortly, as calls are being exchanged at triple the expected intraday levels. Plus, DANG's 30-day ATM IV has jumped 7.8% to 57.1%, indicating elevated demand for short-term options. Digging deeper, it appears a number of traders are buying to open the equity's OOTM September 14 call, anticipating the momentum name will make a sharp move higher by week's end, when the front-month options expire. DANG last traded above $14 as recently as last Monday.

  • GoPro Inc (NASDAQ:GPRO) hit a fresh record high of $71.42 right out of the gate this morning, but is currently down 3.5% at $66.78. However, this pullback may have been in the cards, as the stock's 14-day Relative Strength Index (RSI) of 82 sits firmly in overbought territory. In the options pits, speculators are once again focusing on puts, which are changing hands at double the typical intraday rate. Most active is the September 66 put, where nearly 3,700 contracts are on the tape. The majority of these are being bought to open, indicating an expectation for continued downside in the shares through the end of this week, when the puts cease trading.

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