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Qihoo 360 Technology Co Ltd (QIHU) Earnings Beat Could Spook Bears

Option traders, short sellers targeted Qihoo 360 Technology Co Ltd ahead of earnings

by 11/25/2014 10:46 AM
Stocks quoted in this article:

Qihoo 360 Technology Co Ltd (NYSE:QIHU) has spiked more than 5% this morning to trade at $72.99, as traders cheer the company's latest earnings report -- which included a better-than-expected per-share profit. Recent speculators, however, are likely not as happy, as sentiment leading up to last night's event was decisively bearish.

On the options front, QIHU's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.56 registers in the 70th percentile of its annual range. In other words, in the two weeks leading up to earnings, traders were buying to open puts over calls at a faster-than-usual clip, presumably anticipating a post-event swoon. An unwinding of this negativity in the face of QIHU's intraday rally could spell additional upside.

Options players aren't the only ones that got it wrong, either. In fact, 10.5% of QIHU's float is sold short, suggesting there's plenty of cash on the sidelines. Should the equity maintain its positive momentum, short sellers may be forced to cover, adding fuel to Qihoo 360 Technology Co Ltd's (NYSE:QIHU) fire.


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Options Check-Up: Cree, Inc., Boeing Co and AT&T Inc.

Analyzing recent option activity on CREE, BA, and T

by 11/25/2014 7:49 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are LED stock Cree, Inc. (NASDAQ:CREE), aerospace titan Boeing Co (NYSE:BA) and telecom issue AT&T Inc. (NYSE:T). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on CREE, BA, and T.

  • Since gapping down nearly 18% following last month's fiscal first-quarter earnings miss, CREE has gained back 34% to close at $36.56 yesterday. Even with the stock's recent rebound, sentiment in the options pits appears bearish. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Cree, Inc.'s 50-day put/call volume ratio of 0.62 ranks in the 78th percentile of its annual range, showing puts have been bought to open over calls at a faster-than-normal pace. Right now, traders aren't spending much on their bets, as the equity's Schaeffer's Volatility Index (SVI) of 34% ranks in the 22nd percentile of its annual range, showing short-term options are relatively inexpensive, on a volatility basis.

  • Option bears have been rushing toward BA recently, as its 10-day ISE/CBOE/PHLX put/call volume ratio of 0.91 stands only 3 percentage points from an annual pessimistic extreme. Boeing Co's near-term options can be had at bargain price, according to its SVI of 15% -- in the 17th percentile of all similar readings taken in the past year. On the technical front, BA added 1.4% yesterday to finish at $134.61, amid news that final assembly has begun on its 787-9 Dreamliner. However, the stock remains 1.4% lower year-to-date.

  • T dropped below its year-to-date breakeven mark yesterday, finishing 1.6% lower at $34.70. Nevertheless, option traders remain mostly upbeat toward the equity, per its 10-day ISE/CBOE/PHLX call/put volume ratio of 1.52, a number that ranks in the bullishly skewed 67th annual percentile -- though some of this call buying may have been at the hands of short sellers seeking a hedge, as short interest spiked 14% during the two most recent reporting periods. AT&T Inc.'s short-term options are also inexpensive on a volatility basis, as its SVI of 12% ranks in the 17th percentile of its annual range.


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Most Active Options Update: Twitter Inc (TWTR)

Traders are eyeing front-month gains for Twitter Inc

by 11/24/2014 2:38 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 Twitter Inc (NYSE:TWTR), where front-month strikes are in focus.

Most Active Options Table

Twitter Inc calls are trading at more than three times the pace of puts so far this afternoon. In fact, all 10 of the stock's most active strikes are on the call side of the fence, led by the December 39 strike, where 6,257 contracts are on the tape.

Based on the fact that 63% of the calls changed hands at the ask price, and there are just 2,222 contracts in open interest at the front-month strike, it's safe to assume bullish bets are being initiated. In other words, the call buyers are banking on TWTR to continue heading north through the close on Friday, Dec. 19, when the December series expires.

Currently, Twitter Inc (NYSE:TWTR) is up 0.2% at $40.10, meaning the calls are already in the money. However, in order for the traders to profit at expiration, the underlying must be perched above breakeven at $41.25 -- or the strike plus the volume-weighted average price of $2.25.


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Most Active Weekly Options: Facebook Inc (FB)

Bullish bettors expect Facebook Inc to topple $75 by week's end

by 11/24/2014 1:59 PM
Stocks quoted in this article:

The 20 stocks listed in the table below are the names that have attracted the highest weekly options volume during the past 10 trading days. Those 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), where call volume nearly triples put volume.

Most Active Weekly Options Table

Facebook Inc has gained a modest 0.6% this afternoon to trade at $74.18, and options traders have set their sights on additional upside through the end of the week. Specifically, the social networking stock's most active option is the weekly 11/28 75-strike call, where 8,261 contracts are on the tape.

The majority of the contracts have changed hands at the ask price, implied volatility (IV) has edged higher -- even though FB's 30-day at-the-money IV touched a 52-week low earlier -- and volume outstrips open interest, collectively implying buy-to-open activity. In other words, the buyers anticipate the shares will topple $75 by Friday's close, when the series expires.

While the underlying need only gain about 1% to hit the aforementioned strike, Facebook Inc (NASDAQ:FB) could face a potentially rough road ahead. The $75 area has acted as resistance this month, reinforced by the more than 7,500 contracts in call open interest at the corresponding strike in the 11/28 series. What's more, the shares are now staring up at their 100-day moving average (at $74.47), which recently served as support, but could now reverse roles to limit additional upside.


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Micron Technology, Inc. (MU) Traders Eye Higher Highs

Micron Technology, Inc. touched a 12-year high out of the gate

by 11/24/2014 10:33 AM
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Micron Technology, Inc. (NASDAQ:MU) has jumped 2.4% this morning to trade at $35.12, and earlier touched a 12-year high of $35.25. This follows Friday's similarly bullish session, during which the shares tacked on 3.3%, calls traded at twice the typical single-session rate, and the stock's 30-day at-the-money implied volatility rose 3.6% to 31% -- indicating elevated demand for short-term strikes.

Friday's most active non-expiring option was the weekly 12/12 36-strike call. Nearly nine in 10 crossed at the ask price, and open interest soared over the weekend, making it safe to assume bullish bets were initiated -- a theory confirmed by data from the International Securities Exchange (ISE) and Trade-Alert.

In short, these call buyers anticipate MU will topple $36 by the close on Friday, Dec. 12, when the weekly series expires. Gains are theoretically unlimited to the upside, while losses are capped at the initial premium paid, should the stock be sitting below the strike at expiration.

Longer term, Micron Technology, Inc. (NASDAQ:MU) has been a technical titan, advancing 62% year-to-date. Should this strong price action continue, short-covering activity could provide a catalyst even higher, as roughly 10% of the equity's float is sold short.


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