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Caterpillar Inc. (CAT) Traders Gamble On an Extended Retreat

Caterpillar Inc. (CAT) puts are trading at five times the average intraday pace

by 3/5/2015 11:30 AM
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It's been a tough few months for Caterpillar Inc. (NYSE:CAT), which has shed nearly a quarter of its value since hitting its most recent high of $107.12 on Nov. 21, due to pressure from its 40-day moving average. The stock is extending this slide today, despite a broad-market uptick -- off 1% at $80.87 -- and options traders think there's more downside ahead.

Daily Chart of CAT Since November 2014 With 40-Day Moving Average

Taking a quick step back, puts are trading at five times what's typically seen at this point in the day, and are outpacing calls by a 3-to-1 margin. The round-number $80 mark is in focus today, with possible buy-to-open activity detected at CAT's weekly 3/27 80-strike and April 80 puts. By initiating these long puts, speculators expect the security to breach the strike price by the respective expiration dates.

Widening the sentiment scope reveals it's been call buyers who have been active in CAT's options pits. Specifically, the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 0.89 ranks in the 80th annual percentile. Simply stated, calls have been bought to open over puts at a quicker-than-usual pace in recent weeks.

On the fundamental front, Caterpillar Inc. (NYSE:CAT) announced today it has taken a minority stake in analytics firm Uptake. This comes just weeks after the company said its subsidiaries are being investigated by U.S. authorities.


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Bank of America Corporation (BAC) Bears Active Ahead of Stress Tests

Bank of America Corp's (BAC) March 14.50 put is being bought to open today

by 3/5/2015 10:49 AM
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The Federal Reserve will release the first phase of its annual stress test results after tonight's close, and ahead of the event, shares of financial giant Bank of America Corp (NYSE:BAC) are up 0.7% at $15.94. In the stock's options pits, puts are trading at 1.2 times what's typically seen at this point in the day, with a number of speculators betting on BAC to drop sharply over the next two weeks.

Specifically, BAC's March 14.50 put has seen the most action thus far, with 12,924 contracts on the tape -- roughly 46% of the equity's total intraday put volume. All signs suggest the majority of these positions are being bought to open, as traders gamble on BAC to move south of $14.50 by the close on Friday, March 20 -- when front-month options expire.

Today's accelerated put activity marks a drastic change of pace in BAC's options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 6.19 ranks in the 92nd annual percentile. In other words, calls have been bought to open over puts at a faster clip just 8% of the time within the past year.

Elsewhere on the Street, sentiment is more mixed toward a stock that's shed roughly 11% this year -- and more recently, surrendered long-term support atop its 320-day moving average. Of the 19 analysts covering Bank of America Corp (NYSE:BAC), 10 have issued a "strong buy" suggestion, compared to nine "holds" or worse.

Daily Chart of BAC Since March 2014 With 320-Day Moving Average

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Analysts, Option Bears Tag-Team Alcoa Inc. (AA)

Alcoa Inc (AA) bears are buying weekly put options after the latest analyst notes

by 3/5/2015 10:43 AM
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It's a proverbial "Groundhog's Day" for Alcoa Inc (NYSE:AA). After surrendering 3.9% on the heels of a bearish brokerage note yesterday, the shares -- along with sector peer Century Aluminum Co (NASDAQ:CENX) -- are once again trading lower on negative analyst attention. AA has given up another 1.9% to linger near $14.32, after Morgan Stanley and Deutsche Bank cut their respective price targets to $18 and $19. What's more, option traders are upping the bearish ante, gambling on even more downside for AA by tomorrow's close.

Intraday put volume is running at seven times the average pace, and is outpacing AA call volume by a margin of nearly 3-to-1. Most active are the weekly 3/6 14- and 14.50-strike puts, which buyers are opening amid expectations for AA to extend its retreat beneath the strikes through the end of the week, at which point the options expire. The stock hasn't ended a session south of $14 since June, as this neighborhood has emerged as support during the past few pullbacks.

Daily Chart of AA since March 2014

Despite the Alcoa Inc's (NYSE:AA) struggles -- the shares are down more than 9% year-to-date -- there's still plenty of room on the bearish bandwagon. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.56 stands higher than just 26% of all other readings from the past year, suggesting short-term traders are more call-heavy than usual. Likewise, nine out of 15 analysts maintain "buy" or better endorsements, and the consensus 12-month price target of $18.96 sits in territory not charted since October 2008.


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Option Bull Throws Down Millions on Tesla Motors, Inc. (TSLA)

A huge long call spread was initiated on Tesla Motors Inc (TSLA)

by 3/5/2015 10:35 AM
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Tesla Motors Inc's (NASDAQ:TSLA) recent momentum is carrying over this morning, with the shares up 1.2% at $204.81 -- putting them on pace for their third straight positive session. Amid this uptick, calls are trading at nearly triple the expected intraday rate, with one speculator placing a brow-raising seven-figure bet.

According to Trade-Alert, one option bull initiated a massive long call spread at the June 225 and 250 calls for an initial cash outlay of more than $2.7 million -- $5.45 net debit per pair of contracts * 5,000 contracts * 100 shares per contract -- which represents his maximum potential risk on the transaction. In other words, this trader is rolling the dice on TSLA rallying as high as the round-number $250 mark by June options expiration.

As alluded to, the auto stock has had a strong past couple days. However, TSLA has been trending lower over the long term -- down 19% year-over-year -- and hasn't toppled the quarter-millennium level since late November.

As such, option players have been placing bearish bets over bullish in recent months at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Tesla Motors Inc (NASDAQ:TSLA) boasts a 50-day ISE/CBOE/PHLX put/call volume ratio of 1.01, which ranks higher than four-fifths of all readings from the past year.

Daily Chart of TSLA since November 2014


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Sinking Peabody Energy Corporation (BTU) Sees a Barrage of Put Buying

Peabody Energy Corporation (BTU) puts are trading at 10 times the average intraday pace

by 3/4/2015 3:03 PM
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It's a bad day for energy names, and Peabody Energy Corporation (NYSE:BTU) is no exception. The stock is off 7.1% -- deepening its year-over-year deficit to 61% -- to trade at $6.72. Options traders are responding in kind, and are scooping puts at 10 times what's typically seen at this point in the day.

Put players, specifically, have set their sights on BTU's weekly 3/13 and June series of options. In the former, buy-to-open activity has been detected at the 6.50 and 7 strikes, while it appears new positions are being purchased at the 4 and 5 strikes in the latter. By initiating the puts, speculators expect BTU to settle south of the strike prices at the respective expiration dates.

Today's pop in put volume just echoes the withstanding trend witnessed in the stock'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 1.03 rests higher than 79% of similar readings taken in the past year.

Echoing this put-skewed bias is BTU's Schaeffer's put/call open interest ratio (SOIR) of 1.03, which ranks in the 92nd annual percentile. In other words, short-term speculators have been more put-heavy toward the security just 8% of the time within the past year.

Outside of the options pits, however, there is still plenty of room on Peabody Energy Corporation's (NYSE:BTU) bearish bandwagon. Among covering analysts, 44% maintain a "buy" or better rating, while the average 12-month price target of $9.85 stands at a 46.6% premium to current trading levels. Going forward, another round of downwardly revised analyst notes could create additional headwinds for the shares.


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