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Most Active Options Update: Facebook Inc (FB)

Facebook Inc option traders anticipate all-time highs

by 8/19/2014 10:39 AM
Stocks quoted in this article:

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 today is Facebook Inc (NASDAQ:FB), which is muscling higher in step with the broader equities market.

Most Active Options Table

Facebook Inc calls are outpacing puts by a more than 2-to-1 margin this morning, with speculators taking a shine to short-term options. The stock's 30-day at-the-money (ATM) implied volatility (IV) has edged 1.8% higher to 27%, and the four most active contracts are calls expiring within the next month.

Specifically, the ATM 75 strike is in focus, with buy-to-open activity detected in the weekly 8/22 and September series. The majority of the contracts have traded on the ask side, and IV is trending higher at both strikes. The volume-weighted average price (VWAP) of the weekly call is $0.69, and -- due to its added time value -- the VWAP on the September 75 call is $2.42.

To profit on their purchases, the weekly call buyers need FB to be perched atop $75.69 (strike plus VWAP) by Friday's close, when the contracts expire. Profit potential is theoretically unlimited north of breakeven, while risk is capped at the initial premium paid. In light of FB's advance -- the stock was last seen 0.7% higher at $75.11 -- delta on the call has ticked north, to 0.54 from 0.41 on Monday, suggesting a slightly greater-than-50% shot of expiring in the money.

At-expiration breakeven for the September 75 calls is higher, at $77.42 -- a record high for FB. Again, the buyers' reward is theoretically unlimited north of here, while the most they stand to lose is the initial premium paid for the calls, should FB settle south of $75 at expiration on Friday, Sept. 19. Delta on the call rests at 0.53, compared to 0.49 at Monday's close.

Meanwhile, more aggressive bulls are buying to open the weekly 9/5 78-strike call for a VWAP of $0.55. As such, the buyers will profit if FB muscles atop $78.55 by the close on Friday, Sept. 5. This breakeven represents expected upside of 4.6% from FB's current price, and stands 2.4% higher than the security's current all-time peak of $76.74.

On the charts, Facebook Inc (NASDAQ:FB) has soared 37.5% in 2014, and has outperformed the broader S&P 500 Index (SPX) by more than 17 percentage points in the past three months. Nevertheless, today's bullish betting represents a change of pace for the stock. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.51 stands higher than 86% of all other readings from the past year, pointing to a healthier-than-usual appetite for long puts of late. A mass exodus of option bears could add fuel to FB's fire.


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Nokia Corporation (ADR) (NOK) Traders Eye a Weekly Win

Nokia Corporation's (ADR) weekly 8/22 8-strike call was popular on Monday

by 8/19/2014 10:09 AM
Stocks quoted in this article:

Nokia Corporation (ADR) (NYSE:NOK) has put in a lukewarm showing in 2014, with the shares off about 2.8% to trade near $7.88. On Monday, option traders bet on the stock to come within striking distance of its year-to-date breakeven mark, by buying to open the equity's weekly 8/22 8-strike call for a volume-weighted average price (VWAP) of $0.06.

Taking a step back, calls traded at more than two times the average daily rate yesterday, and outpaced puts by a roughly 8-to-1 margin. Nearly three-quarters of all call volume centered on the aforementioned strike, and based on the average entry price, breakeven for Monday's call buyers is $8.06 (strike plus VWAP). Gains will accrue on each move north of here, while losses are limited to the initial cash outlay, should NOK settle south of the strike price at week's end. As a point of reference, NOK closed 2013 at $8.11.

From a wider sentiment perspective, yesterday's accelerated call volume only highlights the withstanding trend. 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 17.24 ranks in the 93rd percentile of its annual range. In simpler terms, Nokia Corporation (ADR) (NYSE:NOK) calls have been bought to open over puts with more rapidity just 7% of the time within the past year.


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JA Solar Holdings Co., Ltd. (ADR) (JASO) Bulls Bet On an Earnings Win

JA Solar Holdings Co., Ltd. (ADR) will report earnings ahead of Wednesday's open

by 8/18/2014 2:34 PM
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JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) has a history of performing well in the wake of its earnings reports, and today's option traders are betting on more of the same. At last check, JASO calls are trading at more than three times the average intraday rate, and are outpacing puts by a roughly 2-to-1 margin.

Drilling down, buy-to-open activity has been detected at the September 9 put, where 1,606 contracts are on the tape. Based on JASO's present price of $9.37, these calls are just barely in the money. However, in order for traders to profit at the close on Friday, Sept. 19 -- when front-month options expire -- the shares need to be sitting above $9.54 (strike plus the volume-weighted average price of $0.54).

Profit for today's call buyers will accumulate on a move north of here, while losses are capped at 100% of the premium paid, should JASO settle south of the strike at expiration. Considering the stock's Schaeffer's Volatility Index (SVI) of 59% ranks lower than 85% of similar readings taken in the past year, the speculators can rest easy knowing they placed these front-month bets at a relative bargain.

As noted, JASO will take its turn in the earnings confessional ahead of Wednesday's open, and the equity's historical post-earnings price action tends to favor bulls. In fact, despite falling short of analysts' bottom-line estimates in five of the past eight quarters, JASO has averaged a gain of 4.7% in the session subsequent to reporting -- skewed a bit by its single-day 70.4% rally following its May 2013 results.

Elsewhere on the fundamental front, JA Solar Holdings Co., Ltd. (ADR) (NASDAQ:JASO) announced upbeat test results of its RIECIUM solar photovoltaic (PV) module. Wall Street is taking kindly to the news, sending shares of JASO up 3.5% this afternoon.


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Most Active Options Update: 3D Systems Corporation (DDD)

One options trader is betting on a breakout from 3D Systems Corporation

by 8/18/2014 1:43 PM
Stocks quoted in this article:

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 is 3D Systems Corporation (NYSE:DDD), as one trader bets on a high-volatility breakout over the next three months.

Most Active Options Table

Just after midday, 3D Systems Corporation was the subject of an intermediate-term volatility play. Specifically, it appears as though a speculator purchased a block of 1,000 November 49 puts at $5.65 each, and simultaneously bought a matching block of 1,000 November 49 calls for $3.85 apiece. Open interest exceeds volume at both strikes, but a review of the historical volume data suggests this could be the initiation of a new long straddle on DDD.

If so, the net debit on the play was $9.50. This means, at expiration, the straddle buyer will be able to net a profit if DDD is trading above the upper breakeven at $58.50 (strike price plus net debit) or below the lower breakeven at $39.50 (strike price minus net debit). In today's session, DDD is off 0.4% to trade at $48.73 -- nearly flat with the focus strike. Based on the stock's current price, the straddle buyer needs the shares to either rally more than 20%, or fall more than 18.9%.

Though the November 49 put carries less than one point of intrinsic value, it's considerably more expensive than its call counterpart. That's because the November 49 put was pricing in implied volatility (IV) of 57.5% at the time of the spread transaction, compared to IV of 38.0% for the November 49 call. This dramatic skew suggests speculators are placing greater odds on DDD breaking out to the downside than the upside over the next three months.

While the company has yet to confirm an official date, third-quarter earnings from 3D Systems Corporation are typically released in late October. These quarterly events have served as the catalyst for big moves in DDD before, and today's straddle buyer could be looking for history to repeat itself. For example, after the firm's April 2013 announcement, DDD notched a gain of 20.7% in the ensuing week. On the other hand, the July 2014 results preceded a one-week slide of 14.8%.

Technically speaking, now is an opportune time to open a straddle on 3D Systems Corporation (NYSE:DDD). The stock has spent the past week in a tight range between the $48 and $50 levels -- a disappointing development for last Tuesday's crop of eleventh-hour call buyers. However, DDD could soon be due for a drastic move out of this sideways channel.


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Options Radar: Micron Technology, Dick's Sporting Goods, and TASER

Reviewing notable options activity on Micron Technology, Inc., Dick's Sporting Goods Inc, and TASER International, Inc.

by 8/18/2014 12:30 PM
Stocks quoted in this article:

Three names seeing notable option activity today are semiconductor concern Micron Technology, Inc. (NASDAQ:MU), athletic apparel retailer Dick's Sporting Goods Inc (NYSE:DKS), and stun-gun maker TASER International, Inc. (NASDAQ:TASR). Here's a look at how today's option traders have been placing their bets on MU, DKS, and TASR.

  • Micron Technology, Inc. (NASDAQ:MU) is following the broader equities market into the black, up 1.1% at $31.83. The shares have advanced 46.3% so far in 2014, and option traders today are gambling on even more upside for MU this week. The equity's weekly 8/22 31.50-strike call is the most active option so far, with speculators buying the contracts to open amid hopes for an extended advance north of $31.50 through Friday's close. In light of MU's uptick today, delta on the call has jumped to 0.62 from 0.51 at Friday's close, suggesting about a 62% shot of expiring in the money at the end of the week.

  • Dick's Sporting Goods Inc (NYSE:DKS) is up 0.7% at $43.25, and the stock's short-term options are flying off the shelves ahead of the company's turn in the earnings confessional tomorrow morning. In fact, the security's 30-day at-the-money (ATM) implied volatility (IV) touched a 52-week high earlier in the session, and was last seen 7.5% higher at 39.1%. Digging deeper, puts are trading at 11 times the intraday norm, and it looks like one bear may be rolling down his position by selling to close September 38 puts, and buying to open September 37 puts.

  • TASER International, Inc. (NASDAQ:TASR) has added 8.3% to $15.06, bringing its month-to-date gain to nearly 25%, as hopes for the company's body-mounted cameras escalate in the wake of the situation in Ferguson, Missouri. Overall option volume is running at nine times the typical intraday pace, though calls are outpacing puts by a more than 2-to-1 margin. The equity's 30-day ATM IV has popped 9.2%, pointing to an escalating demand for short-term contracts, and buy-to-open activity has been detected at the stock's out-of-the-money September 16 call. By purchasing the newly front-month calls to open, the speculators expect TASR to surmount $16 -- territory not charted since early May -- by the close on Friday, Sept. 19, when the options expire.

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