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Can Mylan Inc. (MYL) Take Out $60?

Mylan Inc (MYL) is soaring, and option traders think it's just the beginning

by 1/26/2015 1:47 PM
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Generic drugmaker Mylan Inc (NASDAQ:MYL) is up 4.1% at $56.45, and is seeing some serious volume, after the firm said it expanded its contract to manufacture and distribute partner Gilead Sciences, Inc.'s (NASDAQ:GILD) hepatitis C treatments. MYL's 30-day at-the-money implied volatility has popped 8.1% to 29.1%, and call volume is running at twice the average intraday pace, pointing to a growing demand for short-term bullish bets.

Specifically, it looks like buyers are circling the February 60 call, purchasing the contracts to gamble on a rally north of $60 -- and into record-high territory -- by the close on Friday, Feb. 20, when the options expire. In light of MYL's jump, delta on the call has skyrocketed to 0.22 from 0.086 at Friday's close, suggesting about a 22% shot of expiring in the money.

Today's affinity for long calls is just more of the same for MYL, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 11.09 stands higher than three-quarters of all other readings from the past year. In other words, option buyers have been more call-focused than usual during the past two weeks.

It's worth noting, though, that short interest represents more than two weeks' worth of pent-up buying demand, at MYL's average pace of trading. Against this backdrop, some of the recent call buying -- especially at out-of-the-money strikes -- could be attributable to short sellers looking for an options hedge.

On the charts, Mylan Inc (NASDAQ:MYL) has taken a breather since touching an all-time high of $59.60 on Nov. 28, and is currently battling its 10-week moving average, currently located in the $26.50 vicinity.

Weekly Chart of MYL since July 2014 with 10-Week Moving Average

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Advanced Micro Devices, Inc. (AMD) Bulls Active Amid Buyout Buzz

Advanced Micro Devices, Inc. (AMD) is soaring on buyout rumors

by 1/26/2015 1:41 PM
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Advanced Micro Devices, Inc. (NASDAQ:AMD) has surged 5.7% on unconfirmed rumors that a Chinese tech firm may be considering a buyout. Option bulls are responding in force, with calls flying off the shelves at 12 times the usual intraday pace, and outstripping puts 44,000 contracts to 30,000. Short-term strikes are in focus, too, based on a 12.8% rise in the stock's 30-day at-the-money implied volatility -- now at 50.6%.

Based on data from Trade-Alert, buy-to-open activity is transpiring at the weekly 1/30 2.50-strike call. More than 14,600 contracts have crossed the tape at this now in-the-money strike -- more than any other AMD option -- as traders wager on an extended advance north of $2.50 through Friday's close, when the weekly series expires.

Today's call-skewed session represents a break from the prevailing trend. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly eight AMD puts for every call. The resultant put/call volume ratio of 7.65 sits just 4 percentage points from a 12-month peak.

In like manner, the stock's Schaeffer's put/call open interest ratio (SOIR) of 3.41 outstrips 98% of comparable readings from the last year. In other words, short-term traders have rarely preferred puts over calls more strongly than they do now.

This is understandable, given Advanced Micro Devices, Inc.'s (NASDAQ:AMD) longer-term technical struggles. Year-over-year, the stock has lost nearly one-quarter of its value, and was last seen at $2.59.


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Rockwell Medical, Inc. (RMTI) Gaps Higher; Are Bears Worried?

Rockwell Medical Inc's (RMTI) move could set up a short-squeeze situation

by 1/26/2015 11:20 AM
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Rockwell Medical Inc (NASDAQ:RMTI) gapped up at the open to $12.47 -- its highest point since April 2014 -- after the Food and Drug Administration (FDA) approved its iron replacement drug, Triferic, for commercial sale. The stock was last seen 1.5% higher at $10.97, likely disappointing many bears in and out of the options pits.

On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.17 stands higher than two-thirds of all other readings from the past year. In other words, option players have initiated bearish bets over bullish at a faster-than-usual clip during the past two weeks. A reversal in sentiment among option buyers could translate into additional tailwinds for RMTI.

In the same vein, nearly one-fifth of RMTI's float is in the hands of short sellers, accounting for 11 sessions' worth of pent-up buying pressure, at the equity's typical daily trading pace. If RMTI can extend today's rally, a short-squeeze situation could ensue, adding even more fuel to the security's fire.

The analyst community remains split on RMTI, with three of the covering brokerage firms issuing "strong buy" recommendations, and the other two doling out "strong sells." Also, the stock's consensus 12-month price target of $22.20 is more than double current trading levels.

On the technical front, Rockwell Medical Inc (NASDAQ:RMTI) has outperformed the S&P 500 Index (SPX) by more than 30 percentage points during the past month. With today's gain, the stock has added 7.8% in the past 52 weeks, but could run into a roadblock in the $12-$12.50 region, which has stifled upside momentum over the past several months.

Daily Chart of RMTI Since April 2014

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Altisource Portfolio Solutions S.A. (ASPS) Traders Predict a Pullback

Altisource Portfolio Solutions S.A. (ASPS) is enjoying a halo lift, but option buyers remain wary

by 1/26/2015 10:55 AM
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The shares of Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) are up 8% at $23, thanks to a halo lift from mortgage lender Ocwen Financial Corp (NYSE:OCN), which settled with California regulators. Nevertheless, ASPS puts remain the options of choice, with speculators rolling the dice on an extended slump for the stock, which has shed nearly one-third of its value already in 2015.

ASPS puts are running at 1.5 times the average intraday pace, with traders apparently buying to open the deep out-of-the-money February 15 put. These contracts won't move into the money unless ASPS breaches $15 -- territory not charted in more than five years -- by the close on Friday, Feb. 20, when front-month options expire.

As alluded to earlier, today's appetite for bearish bets is more of the same for ASPS. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.09 ranks in the 62nd percentile of its annual range. In other words, option buyers have picked up ASPS puts over calls at an accelerated clip during the past two weeks.

Echoing that, short interest grew 12.1% during the most recent reporting period, and now accounts for a whopping 40.8% of ASPS' total available float. At the equity's average pace of trading, it would take about six sessions to buy back these bearish bets.

This broad skepticism isn't surprising, though, as Altisource Portfolio Solutions S.A. (NASDAQ:ASPS) has underperformed the S&P 500 Index (SPX) by more than 70 percentage points during the past three months. The security touched a multi-year low of $16 about two weeks ago, and continues to face resistance at its 10-day and 20-day moving averages.

Daily Chart of ASPS since September 2014 with 10-Day and 20-Day Moving Averages

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Pre-Earnings Bears Take Aim at Microsoft Corporation (MSFT)

Microsoft Corporation (MSFT) will report quarterly earnings tonight

by 1/26/2015 10:53 AM
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Microsoft Corporation (NASDAQ:MSFT), which is slated to report earnings after the close, is seeing accelerated options trading activity this morning. Puts are especially popular, running at quadruple the expected intraday rate. Also, expectations for a big post-earnings move are on the rise, per MSFT's 30-day at-the-money (ATM) implied volatility -- up 8% to 22.4%, in the 76th annual percentile.

Digging deeper, the weekly 1/30 46-strike put is being targeted more than any other MSFT contract. From the looks of it, these bets are being bought to open, as traders expect the stock to slide below $46 by Friday's closing bell -- when the weekly series expires.

Put buying has picked up in MSFT's options pits of late. The equity's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) registers at 0.74 -- compared to 0.55 two weeks ago. The current ratio is also higher than more than three-quarters of all other readings from the last year, suggesting a healthier-than-usual appetite for bearish bets over bullish.

As alluded to earlier, MSFT will step under the earnings spotlight this evening, and the options market is expecting a 3.8% single-session post-event move, per near-term ATM straddle stats. Over the past four quarters, though, the stock has averaged a move of just 1.2% the day after releasing quarterly data.

On the charts, Microsoft Corporation (NASDAQ:MSFT) has had an impressive year. While the shares are down 1.4% this morning to trade at $46.52, they've advanced roughly 29% over the last 12 months. If this longer-term technical momentum continues, a capitulation among the option bears could spell additional upside.

Daily Chart of MSFT since January 2014


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