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Options Radar: Galectin Therapeutics, Electronic Arts, and Staples

Reviewing notable options activity on Galectin Therapeutics Inc., Electronic Arts Inc., and Staples, Inc.

by 7/30/2014 1:21 PM
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Three stocks seeing notable options activity today are biotechnology firm Galectin Therapeutics Inc. (NASDAQ:GALT), video game guru Electronic Arts Inc. (NASDAQ:EA), and office supply issue Staples, Inc. (NASDAQ:SPLS). Here's a look at how today's options traders have been placing their bets on GALT, EA, and SPLS.

  • Following yesterday's roughly 61% plunge, GALT is soaring today, after issuing a statement of defense for the clinical trial results of its liver drug, GR-MD-02. In fact, the shares -- whose steep sell-off yesterday sent Galectin Therapeutics Inc. to the short-sale restricted (SSR) list -- were last seen 22.8% higher at $6.99. Meanwhile, in the stock's options pits, overall volume is trading at seven times the average intraday pace, with buy-to-open activity detected at the January 2015 7.50-strike call and the August 7.50 call.

  • EA has edged 0.3% higher to $34.45 this afternoon, in the wake of launching its new video game subscription service for Microsoft Corporation's (NASDAQ:MSFT) Xbox. On the charts, the equity has performed well in 2014, and has tacked on roughly 50%. Meanwhile, in Electronic Arts Inc.'s options pits, calls are trading at 11 times what's typically seen at this point of the day, with nearly all of the volume centering on the September 37 and 41 calls and the December 37 and 41 calls. According to Trade-Alert, one cautiously optimistic trader may be giving her bet a few more months to play out, by rolling out her September bull call spread to the December series.

  • SPLS is up 0.9% at $11.18 this afternoon, and is making an honest effort to notch a daily close north of its 50-day moving average -- currently located at $11.15 -- for the first time since taking a 12.6% earnings-induced dive on May 20. Option traders in today's session are rolling the dice on the equity bucking this bearish post-earnings price action when SPLS steps into the confessional ahead of the open on Wednesday, Aug. 20, by buying to open the stock's out-of-the-money September 12 calls. With more than 14% of Staples, Inc.'s float sold short, though, some of this activity could be at the hands of shorts hedging against any unexpected upside.


Most Active Options Update: Netflix, Inc. (NFLX)

Netflix, Inc. option traders are placing low-priced, short-term bets

by 7/30/2014 12:51 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 today is Netflix, Inc. (NASDAQ:NFLX), which is popular among short-term speculators.

Most Active Options Table

Netflix, Inc. is bucking the broad-market trend lower today, up 1.4% at $430.30. The stock is on pace for a 2% weekly gain, as traders hope for a streaming Seinfeld deal and digest the company's freshly inked interconnection agreement with AT&T Inc. (NYSE:T).

In today's session, speculators are seemingly taking advantage of low-priced NFLX options. The stock's 30-day at-the-money implied volatility (IV) hit a 52-week low earlier in the session, but was last seen 1.2% higher at 29.9%.

Weekly options expiring on Friday are dominating the options pits, and make up nine of the 10 most active NFLX contracts thus far. The weekly 8/1 425- and 430-strike puts, as well as the weekly 8/1 430-strike call, have all seen volume exceed open interest, hinting at new initiations. Underscoring this theory, IV is several percentage points higher at each strike. Meanwhile, the majority of the options have traded on the ask side, pointing to buyer-driven volume.

The volume-weighted average price (VWAP) of the 425-strike put is $2.29, making at-expiration breakeven $422.71 (strike minus VWAP). The buyers' profit will increase the lower NFLX sinks beneath breakeven, while risk is capped at the initial premium paid, should the stock remain atop the strike through Friday's close. In light of the stock's advance, delta on the put has fallen to negative 0.31 from negative 0.52 at Tuesday's close, suggesting the options have about a 31% chance of expiring in the money.

Due to its added intrinsic value, the VWAP of the 430-strike put is $4.21, making breakeven $425.79. Because the put is at the money, its delta stands at negative 0.51, giving the options about a 1-in-2 shot of being in the money at expiration. Again, risk is capped at the initial premium paid, if NFLX is perched atop $430 at week's end.

Meanwhile, the VWAP of the weekly 8/1 430-strike call is $3.74. As such, the short-term bulls will begin to profit if NFLX extends its climb and topples $433.74 (strike plus VWAP) by Friday's close, with gains theoretically unlimited to the upside. As with the puts, the maximum loss is limited to the initial premium paid for the call, should Netflix, Inc. (NASDAQ:NFLX) shares end the week beneath $430. Delta on the call has surged in light of the stock's uptick, and now stands at 0.49, compared to 0.30 at yesterday's close.


General Motors Company (GM) Traders Eye Additional Downside

Yesterday's General Motors Company put buyers eyed the $32 level

by 7/30/2014 10:17 AM
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General Motors Company (NYSE:GM) puts traded at a slightly faster-than-usual pace yesterday, as the automaker's shares continued to struggle -- losing another 1.3% to finish at $34.45 -- following last week's disappointing turn in the earnings confessional. By session's end, 37,000 puts were on the tape, compared to 33,000 calls. What's more, GM's 30-day at-the-money implied volatility edged 0.5% higher to 22.1%, indicating a modest uptick in demand for short-term contracts.

One of the most active strikes in GM's options pits was the out-of-the-money August 32 put, where roughly 5,200 contracts were exchanged. Over three-quarters traded at the ask price, and open interest spiked more than any other strike overnight, collectively suggesting the puts were bought to open at a volume-weighted average price (VWAP) of $0.13. Data from the International Securities Exchange (ISE) likewise confirms some buy-to-open activity.

In a nutshell, the traders expect GM shares to finish below $31.87 (strike less VWAP) by the close on Friday, Aug. 15, when the front-month options expire. Additional profits will accrue on a move all the way down to zero, while potential losses are capped at the initial premium paid, should the shares be resting above the strike at expiration.

On the fundamental front, it's been a tough year for General Motors Company (NYSE:GM), given all of the recall-related news. Yesterday, however, the automaker announced it will launch its newest line of full-size pickups nine months earlier than expected.


Will Whole Foods Market, Inc. (WFM) Take Another Post-Earnings Plunge?

Whole Foods Market, Inc. has a history of post-earnings bearish gaps

by 7/30/2014 9:27 AM
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It's been a dismal year for Whole Foods Market, Inc. (NASDAQ:WFM), with the shares off nearly 35% -- making it the second-worst performer on the S&P 500 Index (SPX) in 2014 -- thanks to a pair of earnings-induced bearish gaps. With the company headed to the earnings confessional after tonight's close, put players rushed the stock's options pits yesterday, scooping up contracts at two times the expected daily pace. Against this accelerated demand, WFM's 30-day at-the-money implied volatility tagged a fresh 52-week peak in intraday trading, before settling 1.4% lower at 45.7%.

The most sought-after WFM option was the weekly 8/1 34.50-strike put, which was bought to open for a volume-weighted average price (VWAP) of $0.49. As such, breakeven for the put buyers at this Friday's close -- when the weekly series expires -- is $34.01 (strike less the VWAP), or in territory not charted by WFM since December 2011.

However, as noted, WFM has had a terrible time on the charts of late, and tagged a two-year low of $36.08 as recently as July 18. Plus, analysts have started to take note of this poor price action, and with an average 12-month price target of $44.73 -- which stands at a 19% premium to WFM's present price of $37.68 -- more price-target cuts could be on the horizon, should the stock continue its historical trend of post-earnings plunges.

In fact, over the past four quarters, WFM has averaged a single-session post-earnings loss of 9.5%, which includes an 18.8% dive in early May. For Whole Foods Market, Inc.'s (NASDAQ:WFM) fiscal third quarter, Wall Street is calling for a per-share profit of 39 cents -- a penny more than what the company earned one year ago.


Will the Cliffs Natural Resources Inc (CLF) Rally Run Out of Steam?

Casablanca won control of Cliffs Natural Resources Inc's board today, sending shares soaring

by 7/29/2014 2:44 PM
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At Cliffs Natural Resources Inc's (NYSE:CLF) annual shareholder meeting today, Casablanca Capital LP came out the clear victor in its six-month proxy fight against CLF, by winning control of its board. Wall Street is cheering the news -- sending shares of CLF up 7.9% to $17.90. In the stock's options pits, overall volume has soared to nearly four times what's typically seen at this point in the day, but a number of speculators are betting on today's rally to run out of steam over the next several weeks.

Specifically, the most active CLF strike today is the August 17 put, where 5,717 contracts have traded -- mostly at the ask price, hinting at buyer-driven volume. Plus, implied volatility has shot 3.7 percentage points higher, and volume exceeds current levels of open interest, making it safe to assume new positions are being initiated.

By purchasing these now out-of-the-money (OTM) puts to open for a volume-weighted average price (VWAP) of $0.68, traders expect Cliffs Natural Resources Inc (NYSE:CLF) to be sitting below breakeven at $16.32 (strike less VWAP) at the close on Friday, Aug. 15 -- when front-month options expire. Profit will accrue on a move down to zero, while losses are capped at 100% of the premium paid, should the contracts expire OTM. At last check, delta for the puts had moved to negative 0.32 from negative 0.55 at last night's close, suggesting a less than 1-in-3 shot the puts will be in the money at expiration.


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