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Options Check-Up: E*Trade Financial, Infinera, and Skyworks Solutions

Analyzing recent option activity on E*TRADE Financial Corp (ETFC), Infinera Corp. (INFN), and Skyworks Solutions Inc (SWKS)

by 1/22/2015 8:14 AM
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Among the stocks attracting attention from options traders lately are online broker E*TRADE Financial Corp (NASDAQ:ETFC), optical services provider Infinera Corp. (NASDAQ:INFN), and semiconductor firm Skyworks Solutions Inc (NASDAQ:SWKS), which all report earnings tonight. Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on ETFC, INFN, and SWKS.

  • Shares of ETFC have underperformed in 2015, with the equity down 9.2% year-to-date to rest at $22.02. However, E*TRADE Financial Corp options traders are bullish ahead of today's earnings report. ETFC's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 16.63 reads higher than 94% of all similar readings taken over the past year. Meanwhile, near-term options for ETFC are neither expensive nor cheap, historically speaking, per its Schaeffer's Volatility Index (SVI) of 37%, which is in the 49th percentile of its annual range.

  • INFN has been a technical juggernaut, adding nearly 84.8% year-over-year to perch at $14.08. What's more, Infinera Corp. gained 3.15% yesterday ahead of today's earnings report, and has increased by an average of 16.3% in the session following its last four earnings reports. Not surprisingly, sentiment in the stock's options pits is overwhelming bullish. INFN's 50-day ISE/CBOE/PHLX call/put volume ratio of 37.15 is higher than 95% of all similar annual readings. It is important to note that about 12% of INFN's available float is sold short, though, so a portion of this call buying could be at the hands of short sellers hedging against the possibility of more upside. Short-term options for the security are currently expensive, relatively speaking, as its SVI of 65% sits in the 82nd percentile of its annual range.

  • SWKS has also been a technical outperformer, gaining a staggering 144.7% year-over-year to hit $77.30 -- including a fresh 14-year high of $77.34 just yesterday. Additionally, the semiconductor firm has added an average of 6.3% in the subsequent session following its last eight earnings reports. Surprisingly, sentiment in Skyworks Solutions Inc's options pits is trending bearishly, per its 10-day ISE/CBOE/PHLX put/call volume ratio of 0.52, which ranks in the 90th percentile of all similar readings taken over the past year. However, some of the recent put buying could be attributable to shareholders looking to lock in gains in the event of a dip. The stock's near-term options are slightly more expensive than usual, with its SVI of 46% sitting in the 60th percentile of all annual readings.

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Alibaba Group Holding Limited (BABA) Ascent Attracts Short-Term Bulls

Are Alibaba Group Holding Ltd (BABA) option players predicting an earnings win?

by 1/21/2015 1:53 PM
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The shares of Alibaba Group Holding Ltd (NYSE:BABA) are gaining ground today, up 3.4% at $103.49. Against this backdrop, option bulls are placing bets at an accelerated rate, with short-term calls in demand. Intraday call volume is running at 1.7 times the typical rate, and the stock's 30-day at-the-money implied volatility has surged 6.4% to 36.9%.

Nine of the 10 most active options are calls, and it looks like buyers are initiating positions at the February 105 call. The option will be in the money if BABA topples $105 by the close on Friday, Feb. 20, when the newly front-month options expire -- which encompasses the company's earnings date next Thursday, Jan. 29.

Today's affinity for bullish bets is just more of the same for one of the hottest Wall Street freshmen of 2014. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open about 1.7 calls for every put during the past two weeks. Likewise, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.73 indicates that short-term calls outnumber their put rivals.

Thanks to today's ascent, Alibaba Group Holding Ltd (NYSE:BABA) is on pace to end atop both its 10-day and 20-day moving averages for the first time since Dec. 22. Still, the security remains 13.8% south of its all-time high of $120, tagged in mid-November. Off the charts, Alibaba is flexing its pocketbook; the company yesterday said it would invest in start-up Visualead, which specializes in QR code technology, and is reportedly considering a stake in state-run New China Life Insurance.

Daily Chart of BABA since November 2014 with 10-Day and 20-Day Moving Averages

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FXCM Inc. (FXCM) Call Volume Soars Amid Rebound

FXCM Inc (FXCM) call buyers are targeting the $2.50 mark today

by 1/21/2015 1:52 PM
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It's been a volatile few sessions for FXCM Inc (NYSE:FXCM) amid the fallout from last week's unexpected currency surprise from the Swiss National Bank. Yesterday, for example, the shares plunged 87%, while today, they are up nearly 43%. Against this backdrop, the equity's 30-day at-the-money implied volatility is lingering in annual-high territory, and options volume has soared to 29 times what's typically seen at this point in the day.

Drilling down, calls are the options of choice, and are outpacing puts by a 13-to-1 ratio. Speculators are targeting a move north of the $2.50 mark over the next several months, with buy-to-open activity detected at FXCM's February, March, and May 2.50 calls. All told, 16,092 contracts have changed hands across this trio of out-of-the-money strikes, representing 70% of the total intraday call volume.

Today's preference for calls over puts is just more of the same in the forex firm's options pits, as evidenced by FXCM's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 8.97. This is echoed in the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.24, which ranks lower than 84% of similar readings taken in the past year.

Outside of the options pits, nearly 15% of the stock's float is sold short, suggesting some of the recent call buying may have been a result of shorts initiating hedges on their bearish bets. Elsewhere, two-thirds of covering analysts still maintain a ""hold" or worse recommendation on FXCM Inc (NYSE:FXCM), while the average 12-month price target of $15.30 stands at an 85% premium to the equity's current perch at $2.29. As KBW has indicated in recent sessions, though, these ratings and price targets are subject to change.


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Amazon.com, Inc. (AMZN) Rumors Spark a Mad Dash for Calls

Amazon.com, Inc. (AMZN) calls are flying off the shelves after reports of an Icahn stake

by 1/21/2015 12:23 PM
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The shares of Amazon.com, Inc. (NASDAQ:AMZN) gapped higher around midday, peaking at $306, amid rumors -- since reportedly denied -- that Carl Icahn took a stake in the e-commerce giant. The stock is still flirting with a 2.7% gain at $297.20, and option bulls are gambling on more upside through the end of the week.

AMZN calls are trading at three times the average intraday pace, and the security's 30-day at-the-money implied volatility has popped 2.6% to 42.8%, reflecting the growing demand for short-term contracts. Digging deeper, it looks like short-term bulls are buying to open the weekly 1/23 295- and 300-strike calls, on hopes that AMZN will end the week north of the respective strikes.

Delta on the now in-the-money 295-strike call has more than doubled from yesterday's close, surging to 0.60 from 0.26. Meanwhile, delta on the 300-strike call more than tripled to 0.36 from 0.11. In other words, the 295- and 300-strike calls have about a 60% and 36% chance, respectively, of expiring in the money at Friday's close.

Today's appetite for bullish bets marks a change of pace among short-term options traders, though. AMZN's Schaeffer's put/call open interest ratio (SOIR) currently sits at an annual high of 1.68, suggesting near-term option players haven't been more put-heavy during the past year.

Thanks to today's jump -- which still pales in comparison to that of fellow independent entertainment producer Netflix, Inc. (NASDAQ:NFLX) -- Amazon.com, Inc. (NASDAQ:AMZN) is on pace to settle atop its 10-day moving average for the first time since Jan. 2. However, the equity's intraday upside was capped at its 40-day moving average -- a trendline that hasn't been defeated on a daily closing basis since Dec. 4.

Daily Chart of AMZN since October 2014 with 10-Day and 40-Day Moving Averages

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Call Buyers Stay Busy as Whole Foods Market, Inc. (WFM) Pops

Whole Foods Market, Inc. (WFM) is being targeted by long-term option bulls

by 1/21/2015 11:08 AM
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Whole Foods Market, Inc. (NASDAQ:WFM) is rallying this morning on the heels of an upgrade to "buy" from "neutral" at Sterne Agee. In addition, the brokerage firm set a price target of $60 -- in annual-high territory -- and lifted its earnings estimates for this year and next. At last check, the shares were up 3.1% at $52.92. Accordingly, call volume has exploded, running at more than triple the expected intraday rate.

Digging deeper, we see that long-term bulls have been active. Specifically, WFM's most active option is the January 2016 40-strike call. While these contracts are currently deep in the money, the traders are looking for the stock to muscle atop the at-expiration breakeven mark of $54.49 (strike plus the volume-weighted average price of $14.49) by the close on Friday, Jan. 15, 2016 -- when the LEAPS cease trading.

From a slightly wider perspective, call buying has picked up in recent weeks. Specifically, during the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WFM has racked up a call/put volume ratio of 3.82 -- higher than 88% of all comparable readings from the last year.

This rush of bullish betting comes amid the stock's recent display of technical strength. Since bottoming in the $36 area in mid-October, Whole Foods Market, Inc. (NASDAQ:WFM) has surged nearly 47% -- helped by an earnings-induced bull gap in early November.


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