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F5 Networks, Inc. (FFIV) Put Buyers Brace for a Post-Earnings Tumble

Speculators are focused on F5 Networks, Inc.'s short-term options

by 7/23/2014 2:59 PM
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F5 Networks, Inc. (NASDAQ:FFIV) options are trading at a five times the usual intraday pace this afternoon, ahead of the company's trip to the earnings confessional tonight. Short-term contracts are in focus, as well, based on the software stock's 30-day at-the-money implied volatility (IV), which has risen 2.2% to 36.1%.

Along those lines, the weekly 7/25 108-strike put is FFIV's most sought-after option, with nearly 1,800 contracts on the tape. More than two-thirds have crossed at the ask, IV has spiked 27.3 percentage points, and volume outstrips open interest -- all signs of buy-to-open activity. In short, these weekly put buyers expect FFIV to tumble below $106.18 (strike price less the volume-weighted average price of $1.82) by Friday evening, when the contracts expire. Additional gains will be had with each step lower the shares are sitting at week's end. By contrast, the most the speculators risk losing is the initial premium paid, should the contracts expire out of the money.

Most likely, today's traders will be paying attention tonight when F5 Networks, Inc. (NASDAQ:FFIV) reports fiscal third-quarter earnings. The company has fared well on the earnings stage, topping the Street's per-share profit view in five of the past seven quarters, and averaging a 1.2% gain in the subsequent session. For that reason (as well as FFIV's 22.2% year-to-date advance to $111.01), it's possible today's put buyers are actually shareholders looking for some short-term protection against an unexpected post-earnings swoon.


Qualcomm Option Bulls Roll the Dice On an Earnings Beat

QUALCOMM, Inc. hit a 14-year high ahead of tonight's quarterly earnings report

by 7/23/2014 2:58 PM
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QUALCOMM, Inc. (NASDAQ:QCOM) will follow in the footsteps of a number of its sector peers when it reports quarterly earnings after tonight's close. Ahead of the event, call volume has soared to more than three times the typical intraday pace today, with eleventh-hour speculators targeting a move to another multi-year high in the wake of the results.

Specifically, the August 82.50 call is the most active QCOM strike today, where 6,158 contracts have traded -- mostly at the ask price, pointing to buyer-driven activity. Plus, implied volatility on this option has edged higher, hinting at the initiation of new positions.

The volume-weighted average price (VWAP) for the calls is $1.31, making breakeven at the close on Friday, Aug. 15 -- when front-month options expire -- $83.81 (strike plus VWAP). Profit will accrue with each additional step north of here, while losses are limited to the initial cash outlay, should QCOM finish south of the strike at expiration.

As touched upon, the equity hasn't traded north of the breakeven mark since January 2000, with QCOM last seen at $81.87. However, the stock has been making a string of higher highs of late, and tagged a fresh 14-year peak of $81.97 earlier, after Northland Securities raised its outlook for QCOM to "outperform" from "market perform." What's more, as my colleague Andrea Kramer noted yesterday, over the past seven quarters, QUALCOMM, Inc. (NASDAQ:QCOM) has averaged a one-week post-earnings gain of 1.5%. For QCOM's fiscal third quarter, Wall Street is calling for a profit of $1.22 per share -- a 19-cent improvement over the company's year-ago results.


Pre-Earnings Call Buyers Swarm Twitter Inc (TWTR)

Several factors could be motivating today's Twitter Inc call buyers

by 7/23/2014 1:58 PM
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Twitter Inc (NYSE:TWTR) calls are outstripping puts this afternoon -- 49,000 contracts to 26,000. Not surprisingly, eight of the social media name's 10 most active strikes are on the call side of the fence.

Taking the top spot is TWTR's August 41 call, where nearly 7,500 contracts are on the tape. It appears these out-of-the-money calls are being bought to open for a volume-weighted average price (VWAP) of $1.30, making at-expiration breakeven $42.30 (strike plus VWAP). Additional gains will mount with each notch north of here, while losses are capped at the initial cash outlay, should the shares be hovering below the strike at the close on Friday, Aug. 15 -- when the front-month contracts expire.

Looking ahead, TWTR is scheduled to report second-quarter earnings after the close next Tuesday, July 29 -- within the aforementioned option's lifetime. Despite the company besting analysts' average per-share profit view in its two quarterly reports since going public last November, the equity has averaged a single-week post-earnings plunge of 19.5%.

Given the deep out-of-the-money status of the August 41 call, Twitter Inc's (NYSE:TWTR) bleak post-earnings price history, and a more than 20% spike in short interest during the most recent reporting period, it's entirely possible today's traders are short sellers looking to protect their downside bets, in the event of an unexpected rally. At last check, the stock was 0.9% higher at $37.96.


Most Active Options Update: Atmel Corporation (ATML)

Atmel Corporation call buyers fade the stock's checkered earnings history

by 7/23/2014 1:31 PM
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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. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest this afternoon is Atmel Corporation (NASDAQ:ATML), with call volume on the microcontroller specialist ramping up well beyond the daily norm.

Most Active Options Table - MID

Options activity has spiked today on Atmel Corporation, with 9,894 calls and 742 puts exchanged so far -- easily dwarfing the semiconductor stock's average daily volume of 2,627 total contracts. The bulk of the action has transpired at the August 9 call, with 8,776 contracts crossing the tape here.

With about 85% of these August 9 calls trading at the ask price, implied volatility (IV) up 7.7 percentage points, and today's volume outstripping open interest of 4,836 contracts, it's a safe bet that new bullish bets on ATML are being added at this strike today. This theory is also confirmed by data from the International Securities Exchange (ISE). The influx of activity has pushed Atmel's 30-day at-the-money IV higher, with this metric rising 12.4% to 52.7% -- in the 93rd percentile of its annual range.

The volume-weighted average price (VWAP) on the August 9 call currently checks in at $0.50, so traders who bought these bets can cash in a profit if ATML is trading above $9.50 (strike price plus VWAP) on expiration Friday. That's a fairly ambitious forecast, with ATML currently trading down 3.4% at $8.87. Plus, breakeven at $9.50 isn't too far from the equity's June 2014 two-year high of $9.76.

Looking ahead, Atmel Corporation (NASDAQ:ATML) is scheduled to report second-quarter earnings after the market closes on Wednesday, Aug. 6. In its last eight quarterly announcements, ATML has matched consensus profit estimates four times, missed once, and exceeded expectations three times. Over this time frame, the stock has lost an average of 2.7% in the session immediately following its earnings report, though its mean deficit for the one-week period after earnings is a narrower 1.4%.


Options Radar: Electronic Arts Inc., GlaxoSmithKline, and Xilinx, Inc.

Reviewing notable options activity on Electronic Arts Inc., GlaxoSmithKline plc (ADR), and Xilinx, Inc.

by 7/23/2014 12:29 PM
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Three stocks seeing notable options activity today are video game issue Electronic Arts Inc. (NASDAQ:EA), pharmaceutical concern GlaxoSmithKline plc (ADR) (NYSE:GSK), and programmable device maker Xilinx, Inc. (NASDAQ:XLNX). Here's a look at how today's options traders have been placing their bets on these three names.

  • Electronic Arts Inc. (NASDAQ:EA) is down 4.8% today at $36.56, despite posting a fiscal first-quarter earnings beat last night, and being met with nine price-target hikes (compared to just one reduction). According to sources, the downturn can be attributed to the company's plans to delay the release of its highly anticipated title, Battlefield: Hardline. Meanwhile, options activity has really picked up, with 14,000 contracts on the tape compared to an expected intraday volume of fewer than 3,700. In particular, short-term traders are buying to open EA's weekly 7/25 38.50-strike call, anticipating the shares will recover by week's end.

  • GlaxoSmithKline plc (ADR) (NYSE:GSK) has shed 5.1% this afternoon to trade at $50.49, due to the firm's poor showing in the earnings confessional this morning, as well as a price-target cut from S&P Capital IQ. Consequently, puts are flying off the shelves, at 31 times their typical intraday clip. GSK's most active strike so far is the out-of-the-money November 50 put, largely thanks to a 1,300-contract lot that was exchanged near the bid price, for $1.85 each. With volume outstripping open interest at the strike, it's safe to assume new positions are being created.

  • Lastly, Xilinx, Inc. (NASDAQ:XLNX) plummeted to an annual low of $39.12 earlier, and was last seen down 14.4% at $41.23. Sparking the sell-off was last night's fiscal first-quarter top-line miss and weaker-than-expected current-quarter sales guidance, coupled with a barrage of price-target cuts from no fewer than nine analysts. In fact, XLNX landed on the short-sale restrict (SSR) list right out of the gate this morning. Not surprisingly, traders have taken to the options pits, where volume is running at 20 times the usual intraday amount, and the stock's 30-day at-the-money implied volatility has spiked 10.4% to 25.8%, suggesting elevated demand for short-term contracts. However, the most active XLNX option is the longer-term December 42 call, where 6,108 contracts have changed hands against just 19 contracts in open interest -- indicating freshly placed bets. A considerable chunk of that volume crossed in early trading as a trio of sweeps; they did so at or near the bid price at the time.


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