Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Most Active Options Update: Microsoft Corporation (MSFT)

Call volume is surging on Microsoft Corporation amid new high

by 9/19/2014 11:12 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 Microsoft Corporation (NASDAQ:MSFT), which has seen a mix of call selling and buying.

Most Active Options Table

Microsoft Corporation is up slightly this morning at $46.77, but earlier managed to touch a new 14-year high of $47.19. The technical milestone has call players buzzing, as the contracts are changing hands at more than quadruple the typical intraday rate. Short-term strikes are in demand, per the stock's 30-day at-the-money implied volatility (IV), which as popped 4.6% to 15.3%.

Diving into the details, MSFT's most active option is the near-the-money September 47 call, where close to 20,000 contracts are on the tape. A considerable portion of the contracts have crossed at the bid price, and data from the International Securities Exchange (ISE) points to some sell-to-close activity. In short, it appears that option bulls are unwinding their bets ahead of tonight's expiration.

Slightly longer-term traders are targeting MSFT's weekly 10/10 48-strike call. Over 90% have been exchanged at the ask price, IV is edging higher, and the ISE confirms newly bought bullish bets. By purchasing these out-of-the-money calls at a volume-weighted average price (VWAP) of $0.31, the speculators are gambling on the shares toppling $48.31 (strike plus VWAP) at the close on Friday, Oct. 10 -- when the weekly contracts expire. Gains are theoretically unlimited north of there, while potential losses are limited to the initial cash layout, should the equity settle south of $48 three weeks from today.

In fundamental news, Microsoft Corporation (NASDAQ:MSFT) announced late Thursday it will lay off 2,100 employees, and will shutter its Silicon Valley research-and-development center. The moves are not unexpected, as CEO Satya Nadella previously outlined plans to cut 14% of MSFT's global workforce, or about 18,000 positions.


Janus Capital Group Inc (JNS) and the $800,000 Bearish Gamble

Janus Capital Group Inc's option volume yesterday centered on the December 12 put

by 9/19/2014 10:01 AM
Stocks quoted in this article:

Janus Capital Group Inc (NYSE:JNS) puts traded at nearly double the expected rate yesterday, and easily outstripped the number of calls on the tape. By the numbers, 7,381 puts were exchanged, compared to a measly 185 calls.

Almost all of JNS' total options volume can be traced to the December 12 put, where 7,209 contracts changed hands. The largest single block consisted of 6,221 contracts, and according to data from Trade-Alert, it was bought to open for $1.30 each. Thus, this speculator laid out an initial premium of more than $800,000 (premium paid * number of contracts * 100 shares per contract) for his bearish bets.

Long story short, the put buyer needs JNS to move lower over the next three months. At-expiration breakeven for the transaction is $10.70 (strike less premium paid) -- territory not explored since mid-April -- with additional gains to be had on a move lower. On the other hand, should shares of the investment firm settle at or above $12 at the close on Friday, Dec. 19 -- when the contracts cease trading -- the buyer will part with his initial cash outlay.

Taking a step back, Janus Capital Group Inc (NYSE:JNS) is off 6.6% in 2014 to churn around $11.56. What's more, the stock's 40-week moving average -- which had been functioning as support since October -- is now overhead at $11.71, and may be reversing roles to act as resistance.


Options Check-Up: DryShips Inc., Netflix, Inc., and Cisco Systems, Inc

Analyzing recent option activity on DryShips Inc., Netflix, Inc., and Cisco Systems, Inc.

by 9/19/2014 8:00 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are transportation issue DryShips Inc. (NASDAQ:DRYS), streaming video titan Netflix, Inc. (NASDAQ:NFLX), and big-cap tech name Cisco Systems, Inc. (NASDAQ:CSCO). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on DRYS, NFLX, and CSCO.

  • DRYS finished yesterday down 2.6% at $3.20, shedding 35.7% since the start of the year. The pace of call-buying has accelerated in the past couple of days. According to the equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 61.55, which is in the 97th percentile of its annual range, calls have been bought to open at a faster-than-normal rate over puts. DryShips Inc.'s Schaeffer's Volatility Index (SVI) of 44% falls in the 6th annual percentile, suggesting that short-term options are at a bargain price, on a volatility basis.

  • NFLX ended yesterday by gaining 1.1% and closing at $459.60, up 24.8% since the start of the year. Short interest rose 18.4% during the most recent reporting period, and now comprises 11.41% of the equity's float -- which would take almost a week to cover, at Netflix Inc.'s average daily trading volume. The 50-day ISE/CBOE/PHLX call/put volume ratio of 1.03 sits 16 percentage points away from an annual peak, implying that calls have been bought to open over puts at a quicker-than-usual pace. SVI for NFLX is at 25%, in the 8th percentile of its annual range, meaning the equity's short-term options are attractively priced right now.

  • CSCO tacked on 0.1% to end the day at $25.22. Year-to-date, CSCO has gained 12%. Over the past 10 days, puts for the equity have been purchased at a rate of 0.6 per call, according to the ISE, CBOE, and PHLX; this ratio is higher than 74% of similar readings from the past year, pointing to a healthier-than-usual appetite for bearish bets over bullish. Cisco Systems, Inc.'s SVI sits at 14%, which is in the 15th percentile of its annual range, indicating the stock's short-term options are relatively inexpensive right now.


Most Active Options Update: Yahoo! Inc. (YHOO)

Spread strategists target Yahoo! Inc. ahead of Alibaba Group Holding Ltd's IPO

by 9/18/2014 2:24 PM
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 Yahoo! Inc. (NASDAQ:YHOO), as option traders place their bets ahead of Alibaba Group Holding Ltd's (NYSE:BABA) initial public offering (IPO).

Most Active Options Table

Excitement is building ahead of Alibaba's IPO, with shares of the e-commerce concern slated to begin trading tomorrow on the Big Board. Considering Yahoo! Inc. is a major stakeholder in BABA, there's a lot happening in the stock's options pits today, with overall volume running at nearly three times the average intraday pace. Against this accelerated demand, the equity's 30-day at-the-money implied volatility (IV) is docked at 49.2% -- just 4 percentage points from the top of its annual range.

One eleventh-hour speculator is apparently hoping for IV to drop off tomorrow, in the wake of the highly anticipated event. Specifically, one block of 1,282 September 42 puts was sold for $1.19 apiece, while a symmetrical block of September 43 calls was sold for $0.91 each. IV soared at each leg, suggesting a short strangle was initiated for a net credit of $2.10 per pair of options.

Ideally, YHOO will finish in between the two strikes at tomorrow's close -- when front-month options expire -- in which case, both legs will expire worthless, and the trader can retain the initial net credit as her full potential reward. However, she stills stands to profit if the stock is docked between the two breakeven rails of $39.90 (sold put less net credit) and $45.10 (sold call plus net credit). On the other hand, she could also be hoping IV takes a plunge tomorrow, which would make it cheaper for her to buy back both legs.

Elsewhere, another experienced options trader appears to have initiated a long put spread with a twist. Shortly after the open, a block of 3,493 October 37 puts traded closer to the bid price for $0.36 apiece, suggesting they were sold, while an identically sized lot of 3,493 October 42 puts went off near the ask price for $2.08 each, indicating they were bought. Simultaneously, the same speculator looks to have sold a symmetrical block of October 47 calls for $1.02 apiece, resulting in a net debit of $0.70 per trio of options.

Had she simply initiated the bear put spread outright, her net debit -- as well as her maximum risk -- would be $1.72 per pair of puts. However, by selling the deep out-of-the-money calls, she decreased her cost of entry, and increased her breakeven mark to $41.30 (bought put minus $0.70 debit) compared to $40.28 (bought put minus $1.72 debit) had she solely played a long put spread. However, she also increased her risk, and should YHOO rally past $47 by the close on Friday, Oct. 17 -- when back-month options expire -- she could risk assignment on the sold calls, and face theoretically unlimited losses.

In today's session, Yahoo! Inc. (NASDAQ:YHOO) was last seen 1.6% lower at $41.91. However, the equity has had quite a run up the charts in the weeks leading up to BABA's IPO, and as such, YHOO's 14-day Relative Strength Index (RSI) is docked in overbought territory at 73. Elsewhere, sources are saying BABA will be priced in a range of $66 to $68 per share.


Options Radar: Sears Holdings Corp, Target Corporation, and VIVUS, Inc

Reviewing notable options activity on Sears Holdings Corp, Target Corporation, and VIVUS, Inc.

by 9/18/2014 2:19 PM
Stocks quoted in this article:

Three stocks seeing notable options activity today are retailers Sears Holdings Corp (NASDAQ:SHLD) and Target Corporation (NYSE:TGT), and biopharmaceutical firm VIVUS, Inc. (NASDAQ:VVUS). Here's a look at how today's options traders have been placing their bets on these three names.

  • Sears Holdings Corp (NASDAQ:SHLD) continues to reel in the wake of Tuesday's troubling financial news, tumbling 4.2% this afternoon to trade at $28.31 -- and bringing its week-to-date deficit to 17.4%. In the options pits, puts are crossing the tape at three times the typical intraday rate, and the stock's 30-day at-the-money (ATM) implied volatility (IV) has jumped 7.4% to 60.4%, signaling elevated demand for short-term options. However, SHLD's most active contract is of the long-term variety, with the January 2016 18-strike put leading the way. These contracts are being bought to open, according to data from Trade-Alert, as speculators wager on additional downside for the shares.

  • On the other hand, Target Corporation (NYSE:TGT) is up 1.5% to hover near $63.79, bringing the shares above their year-to-date breakeven level. This move higher is being met with enthusiasm in the options pits -- especially on the call side, where contracts are crossing at six times the intraday norm. Short-term strikes are popular, too, per TGT's 30-day ATM IV -- up 11.9% to 16.8%. Most active is the weekly 10/10 66-strike call, which is seeing buy-to-open activity, as confirmed by Trade-Alert. By initiating the long calls, the speculators anticipate TGT will topple $66 -- territory not explored since last November -- within the next three weeks.

  • VIVUS, Inc. (NASDAQ:VVUS) is soaring on news that the U.S. Food and Drug Administration (FDA) has approved its fast-acting erectile dysfunction drug Stendra. At last check, the stock was nearly 23% higher at $4.77. In options land, calls are flying off the shelves at 33 times the typical intraday clip, and the equity's 30-day ATM IV has surged 11.6% to 80.9%, signaling strong demand for short-term strikes. Digging deeper, VVUS' October 5 call is being bought to open, as option bulls roll the dice on additional gains in the upcoming weeks.


Featured Brokers
Unusual Option Volume
Option Flow
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email:

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by | Data delayed 15-20 minutes unless otherwise indicated.