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Micron Technology, Inc. (MU) Bullish Bets Fly Off the Shelves

Micron Technology, Inc. calls are trading at more than twice the intraday norm

by 4/17/2014 10:52 AM
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Option Brief: Micron Technology, Inc. (NASDAQ:MU) is bucking the broad-market trend lower this morning, enjoying a post-earnings halo lift from sector peer SanDisk Corporation (NASDAQ:SNDK). The shares of MU are 4.4% higher at $23.46, and options traders are rolling the dice on more upside for the memory maker in the short term.

Already today, MU has seen roughly 67,000 calls cross the tape -- more than two times the average intraday volume. For comparison, around 29,000 MU puts have traded. Most active is the weekly 5/23 22.50-strike call, where more than 10,000 contracts have changed hands, primarily in a sweep just before 10 a.m. ET. The calls crossed at the ask price of $1.67 apiece, volume has surpassed open interest at the strike, and implied volatility is trending higher -- hinting at newly bought bullish bets.

By purchasing the calls to open, the buyer will make money if MU powers north of $24.17 (strike plus premium paid) by the close on Friday, May 23, when the options expire. Risk is capped at the initial cash outlay for the calls, should MU retreat and finish beneath the strike at expiration. However, the stock's Schaeffer's Volatility Index (SVI) of 39% sits just 12 percentage points from an annual low, implying that MU's short-term options are inexpensive right now, from a historical standpoint.

Not everyone on Wall Street shares the same optimistic outlook as the aforementioned call buyer, though. Short interest accounts for 11.9% of Micron Technology, Inc.'s (NASDAQ:MU) total available float, representing more than four sessions' worth of pent-up buying demand. Should the shares extend their recent rally -- MU is on pace for an 11% gain this week -- a rush to cover by the shorts could translate into contrarian tailwinds.


Why This Sirius XM Holdings Inc. (SIRI) Trader is Selling Options

Sirius XM Holdings Inc. will report earnings ahead of next Thursday's open

by 4/17/2014 9:55 AM
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Option Brief: Sirius XM Holdings Inc. (NASDAQ:SIRI) will take its turn in the earnings confessional ahead of next Thursday's open. As is often the case in the days leading up to such an event, premium on the stock's short-term options has grown. For example, SIRI's Schaeffer's Volatility Index (SVI) has risen to an annual high of 44%, while two weeks ago, this metric stood at a slimmer 34%. Echoing this is the equity's 30-day at-the-money implied volatility (IV), which shot to a 52-week high in yesterday's session. Simply stated, as demand for SIRI's short-term options has increased, so has the cost.

While hefty premium can serve as a deterrent for option buyers, it makes selling options an attractive strategy, and may have been the motivation behind one particular trader in SIRI's options pits yesterday. In the latter half of the session, one massive block of 20,591 May 3.50 calls changed hands at the bid price of $0.06, pointing to seller-driven activity. What's more, IV ticked higher as the transaction crossed, and the strike saw the biggest increase in open interest overnight, making it safe to assume that new positions were initiated.

By selling to open these out-of-the-money calls, the expectation is for SIRI -- presently priced at $3.14 -- to stay south of $3.50 through the close on Friday, May 16, when the soon-to-be front-month options expire. In this best-case scenario, the calls will expire worthless, and the trader can pocket the initial credit collected as her full potential reward. For Wednesday's call writer, this equates to $123,546 (number of contracts * premium collected * 100 shares per contract). Risk, meanwhile, is theoretically unlimited, should SIRI rally past the strike, and the call seller be assigned.

One way to minimize risk on a short call is to study the charts, and it appears Wednesday's call writer may have done just that. SIRI hasn't traded north of $3.50 since mid-March. What's more, its 20-day moving average -- currently located at $3.19 -- has emerged as a newfound layer of resistance, and put a quick stop to SIRI's two most recent rally attempts.

As noted, Sirius XM Holdings Inc. (NASDAQ:SIRI) will report quarterly earnings next week. SIRI has matched or exceeded analysts' bottom-line estimates in five of the past eight quarters, with the stock posting an average gain of 1.1% and 1.2% in the subsequent day and week, respectively. For SIRI's first quarter, consensus estimates are for a profit of 2 cents per share -- in line with the company's year-ago results.


Ford Motor Company (F) Trader Eyes a Post-Earnings Pop

Ford Motor Company's weekly 5/2 16.50-strike call was in focus on Wednesday

by 4/17/2014 9:29 AM
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Option Brief: Ford Motor Company (NYSE:F) is slated to report first-quarter earnings next Friday, but has averaged a one-week post-earnings loss of 0.9% over the past eight quarters, and fell 7.4% in the five sessions following its last earnings report. On the charts, meanwhile, F is battling its 10-month moving average, which hasn't been toppled on a monthly closing basis since November. Nevertheless, it seems one options trader yesterday rolled the dice on an after-earnings pop for the shares.

The stock's weekly 5/2 16.50-strike call was most active by a mile, with nearly 16,700 contracts exchanged. Most of the calls crossed in a multi-exchange sweep, with the biggest block -- 12,360 contracts -- traded for $0.14 each, closer to the ask price at the time, suggesting they were bought. Plus, open interest skyrocketed by close to 15,700 contracts overnight, hinting at fresh bullish positions.

To profit on the play, the buyer needs F to be sitting atop $16.64 (strike plus premium paid) when the weekly options expire at the close on Friday, May 2 -- one week after the aforementioned earnings release. It would take an uptick of 3.7% from Ford's current price at $16.07, in order to topple breakeven -- a level not explored since January. Risk is limited to the initial premium paid for the calls, should F remain south of the strike through the options' lifetime.

Ford Motor Company (NYSE:F) traders this morning are digesting news of Lincoln's debut in China later this year. Elsewhere in the auto world, recall-plagued sector peer General Motors Company (NYSE:GM) is trading at a critical juncture ahead of its own earnings report.


Option Bull Looks for JetBlue Airways Corporation (JBLU) to Fly

JetBlue Airways Corporation options volume swells, powered by a bullish risk reversal

by 4/16/2014 3:04 PM
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Option Brief: JetBlue Airways Corporation (NASDAQ:JBLU) options are trading at breakneck speed this afternoon. More than 7,500 calls and 5,500 puts are on the tape -- roughly six and 23 times their respective intraday averages.

Attracting our attention is a bullish risk reversal, which Trade-Alert highlighted this morning. Specifically, a block of 5,000 May 8 puts traded at the bid price of $0.15 each, and within seconds, a matching lot of May 9 calls crossed the tape at the ask price of $0.25 apiece. Volume at both strikes outstrips open interest, and implied volatility is trending higher. This suggests a spread trader is making a bullish bet on JBLU by selling to open the puts, and simultaneously buying to open the calls.

Under the terms stated above, the trader expects JBLU to fly higher during the next four-plus weeks, and finish above the 9 strike by the close on Friday, May 16, when the soon-to-be front-month options expire. Gains will begin to accumulate past the breakeven point of $9.10 (call strike plus the net debit paid).

By contrast, the option bull is hoping JetBlue shares don't dip below $8, which would put him at risk of assignment -- with a maximum potential loss of $8.10 (short strike plus net debit), should the stock reach zero. Alternatively, both options could be rendered worthless if the shares are resting between $8 and $9 at expiration, in which case the trader would simply part with the $0.10 net debit he paid for each pair of contracts.

The equity is headed in the right direction so far, up 4.3% to $8.67 on an upgrade to "buy" from "hold" at Argus. Also important -- next Thursday morning is JetBlue Airways Corporation's (NASDAQ:JBLU) scheduled earnings date. The Street is projecting first-quarter earnings of 9 cents per share from the airline, or 4 cents higher than a year ago.


Most Active Options Update: Apple Inc. (AAPL)

April-dated options are popular on Apple today

by 4/16/2014 2:11 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 this afternoon is Apple Inc. (NASDAQ:AAPL).


Puts players have been active in Apple Inc.'s options pits of late, per data from three major exchanges. In fact, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.71 ranks in the 98th percentile of its annual range, meaning puts have been bought to open, relative to calls, with more rapidity just 2% of the time within the past year.

In today's session, puts are trading at a slight mark-up to the average intraday pace, with speculators paying particular attention to the April 515 strike. More than 16,000 contracts have changed hands thus far -- a healthy portion at the ask price, hinting at buyer-driven activity. Meanwhile, volume outstrips open interest, suggesting that at least a portion of the day's volume is a result of new positions being initiated. By purchasing the puts to open, the expectation is for AAPL to fall south of $515 by tomorrow's close -- when front-month options expire -- a level breached earlier today when AAPL tumbled to an intraday low of $514.14.

Also worth mentioning is the most active strike in AAPL's options pits today, which happens to fall on the call side. Specifically, 23,032 April 520 calls are on the tape -- more than doubling existing open interest here. Based on AAPL's current price of $518.46, this strike is seeing a mix of buying and selling activity, a theory confirmed by data from the ISE. For those buying to open the calls, the goal is for AAPL to rally north of $520 over the next session-plus, while those selling to open the calls are betting on this level to act as a short-term layer of resistance.

Elsewhere, a U.S district court yesterday ruled against Apple Inc.'s (NASDAQ:AAPL) e-book price-fixing appeal. Meanwhile, LiveDeal Inc (NASDAQ:LIVE) announced it has completed the development of its iOS app, and is now awaiting Apple's approval.


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