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Options Check-Up: 3D Systems, Sears Holdings, and Under Armour

Analyzing recent option activity on DDD, SHLD, and UA

by 12/19/2014 8:16 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are 3-D printer maker 3D Systems Corporation (NYSE:DDD), retailer Sears Holdings Corp (NASDAQ:SHLD), and athletic apparel company Under Armour Inc (NYSE:UA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on DDD, SHLD, and UA.

  • DDD has had an abysmal year, shedding 66% of its value year-to-date to settle at $31.78. However, sentiment in the stock's options pits is bullish. 3D Systems Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.97 stands higher than 75% of all other similar readings in the past year, showing a healthier-than-usual appetite for long calls over puts. However, short interest accounts for nearly 35% of DDD's float, suggesting some of those call purchases may have been at the hands of short sellers looking for a hedge. Whatever the motive, DDD's Schaeffer's Volatility Scorecard (SVS) of 93 indicates the shares have tended to make outsized moves over the past year, relative to what the options market has priced in -- a boon for option buyers.

  • SHLD has also taken a hit in 2014, losing nearly 10% of its value year-to-date, despite an almost 4% gain yesterday, to rest at $33.29. Even though the iconic retailer is struggling to remain relevant, option buyers have been picking up calls over puts at a faster-than-usual clip. Sears Holdings Corp's 10-day ISE/CBOE/PHLX call/put volume ratio of 7.90 is the highest such reading taken in the past year. Again, though, short interest represents almost 29% of SHLD's total float, signaling potential hedging activity. The stock's short-term options are relatively inexpensive at the moment, as its Schaeffer's Volatility Index (SVI) of 82% ranks in the 24th percentile of its annual range.

  • Shares of UA have skyrocketed this year , adding roughly 65% in the past 52 weeks to perch comfortably at $70.94. Unsurprisingly, sentiment in the options pits is fervently bullish. Under Armour Inc's 10-day ISE/CBOE/PHLX call/put volume ratio of 5.46 is an optimistic peak, implying that calls have never been purchased at a faster rate over puts in the past year. However, there's still plenty of room on the bullish bandwagon, as 12 out of 25 analysts maintain "hold" or worse ratings, leaving the door wide open for potential upgrades to push UA even higher. UA's Schaeffer's Volatility Scorecard (SVS) of 76 indicates the shares have made large swings over the past year, relative to what the options market has priced in.

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BlackBerry Ltd (BBRY) Bear Gets Spooked Ahead of Earnings

One BlackBerry Ltd trader rolled her bearish bet out

by 12/18/2014 1:53 PM
Stocks quoted in this article:

BlackBerry Ltd (NASDAQ:BBRY) is slated to take its turn on the earnings stage ahead of tomorrow's open. Although the equity has averaged a single-session post-earnings gain of 5.7% over the last four quarters, put volume in today's session has soared to nine times what's typically seen at this point in the day.

Drilling down, a hefty portion of the day's activity has centered at the December and February 10 puts. Specifically, two symmetrical blocks of 22,016 simultaneously changed hands earlier, and it appears the front-month contracts -- which expire at tomorrow's close -- were sold to close, while the February-dated contracts were bought to open. In other words, it seems this option trader rolled her bearish bet out, hoping BBRY's momentum slows in the new year.

It's been quite a 2014 for BlackBerry Ltd (NASDAQ:BBRY), though, with the shares up 35% to trade at $10.07. More recently, the stock has found a steady layer of support from its 200-day moving average, and since taking a sharp bounce off this trendline on Tuesday, BBRY has already added 9.3%. The security is continuing its upward trajectory today -- adding 0.9%, following a well-received debut of its BlackBerry Classic device.

Daily Chart of BBRY Since January 2014 With 200-Day Moving Average

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Gloomy Outlook Lures Dunkin Brands Group Inc (DNKN) Option Bears

Option traders react after Dunkin Brands Group Inc lowered its 2015 same-store sales growth forecast

by 12/18/2014 11:19 AM
Stocks quoted in this article:

Dunkin Brands Group Inc (NASDAQ:DNKN) has tumbled to an 8.2% loss this morning -- and was last seen at $42.42 -- following a reduction in its 2015 same-store sales growth forecast. Also, shares of the coffee chain were hit with a price-target cut to $43 from $44 at Janney, which reiterated its "neutral" rating. As the stock suffers, option bears are piling on.

At last check, puts were trading at 27 times the expected intraday rate. DNKN's March 42.50 strike is seeing buy-to-open activity, as speculators roll the dice on continued downside over the next three months.

Ahead of March options expiration, DNKN is scheduled to report fourth-quarter earnings -- specifically, before the open on Thursday, Feb. 5. This could work in the bears' favor. Over the last four quarters, the equity has averaged a single-session post-earnings loss of 2.2% -- including a 6% drop in late October.

Longer term, DNKN hasn't provided much reason for optimism, either. The shares have shed 12% of their value in 2014, and are exploring the south side of $43 for the first time since early August.

Despite this technical weakness, Dunkin Brands Group Inc (NASDAQ:DNKN) has seen plenty of bullish betting at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) in recent weeks. The stock's 10-day call/put volume ratio across these exchanges is a mind-bending 82.0, higher than 99% of comparable readings from the previous year.

Daily Chart of DNKN Since January 2014


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Energy Rebound Fails to Ward Off Seadrill Ltd (SDRL) Skeptics

Seadrill Ltd has been in rally mode for the last couple of days

by 12/18/2014 10:37 AM
Stocks quoted in this article:

Seadrill Ltd (NYSE:SDRL) surged 10.5% yesterday to close at $12.16, as part of a broader rally in energy stocks. Option traders took notice, as calls crossed at a rate double the daily norm, and the equity's 30-day at-the-money implied volatility hit a 52-week high of 79.4%, hinting at strong demand for short-term strikes.

However, not everyone jumped aboard SDRL's bullish bandwagon, nor were front-month contracts exclusively popular. In fact, seeing the most buy-to-open activity was the longer-term July 9 put, where 5,682 contracts were exchanged. These speculators are aiming for the shares to breach $9 -- something that hasn't happened in more than five years -- by July 2015 options expiration.

That bearish bets were popular isn't entirely surprising. Even after factoring in today's 5% pop to hover near $12.79, SDRL is down about 69% year-to-date, and has underperformed the broader S&P 500 Index (SPX) by a brow-raising 56.4 percentage points over the last three months. Nevertheless, it's looking increasingly unlikely that yesterday's puts will be in the money at expiration, as delta has dropped to negative 0.27 from negative 0.32 at Wednesday's close.

Elsewhere on the Street, brokerage firms have been growing increasingly skeptical toward Seadrill Ltd (NYSE:SDRL). In fact, five of the seven analysts covering the shares have handed out "hold" ratings, and Howard Weil yesterday slashed its price target to $15 from $44.


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Options Check-Up: Nike Inc, QUALCOMM, Inc., and Nokia Corporation

Analyzing recent option activity on NKE, QCOM, and NOK

by 12/18/2014 7:58 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are athletic apparel giant Nike Inc (NYSE:NKE), networking specialist QUALCOMM, Inc. (NASDAQ:QCOM), and mobile phone maker Nokia Corporation (ADR) (NYSE:NOK). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on NKE, QCOM, and NOK.

  • NKE has performed well in 2014, gaining roughly 20% year-to-date to perch comfortably at $94.50. Surprisingly, sentiment in the options pits is slightly more bearish than usual. Nike Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.51 ranks higher than 57% of all other readings in the past year. However, NKE's 30-day at-the-money implied volatility hit a new high yesterday at 28.8% before settling at 27.8%, showing high demand -- and, thus, elevated prices -- for short-term options ahead of tonight's earnings report.

  • QCOM has tumbled 12.4% since peaking near $82 in mid-July, and despite yesterday's 2.7% gain, the stock has shed 2.7% of its value year-to-date to sit at $72.21. Accordingly, sentiment among options traders is growing increasingly bearish, as the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.87 ranks higher than 90% of readings in the past year. The equity's short-term options are currently more expensive than usual, as its Schaeffer's Volatility Index (SVI) of 25% ranks in the 73rd percentile of its yearly range. Meanwhile, analysts covering QUALCOMM, Inc. are overwhelmingly bullish, with 18 out of 23 giving the equity a "buy" or better rating, with not a single "sell" in sight. If the stock continues to fall, it may see a round of analyst downgrades, which could push the shares even lower.

  • Shares of NOK have underperformed lately, losing 3.1% year-to-date, despite gaining 1.7% yesterday to rest at $7.86. Correspondingly, traders in the options pits are slowly shifting from bullish to bearish on the stock. Nokia Corporation's (ADR) 50-day ISE/CBOE/PHLX put/call volume ratio of 0.29 is in the 75th percentile of its annual range, meaning puts have been bought to open over calls at a faster pace only 25% of the time in the last year. Per the equity's SVI of 38% -- which is in the 43rd annual percentile -- short-term options prices are relatively muted. However, the stock's Schaeffer's Volatility Scorecard (SVS) of 22 indicates the shares have tended to make undersized moves over the past year, relative to what the options market has priced in.

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