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Bulls Rally as Apple Inc. (AAPL) Lingers Near Annual-High Territory

Apple Inc. calls are trading at an accelerated clip today

by 8/18/2014 11:14 AM
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Apple Inc. (NASDAQ:AAPL) option players have shown a distinct preference for bullish bets over bearish of late, as the stock hovers just shy of annual-high territory. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 50-day call/put volume ratio of 2.62 ranks in the 98th percentile of its annual range. Simply stated, calls have been bought to open over puts with more rapidity just 2% of the time within the past year.

In today's session -- with AAPL last seen trading at $98.91, less than 1 point away from its July 29 52-week peak of $99.44 -- call volume is running at a 54% mark-up to what's typically seen at this point in the day. Most active are AAPL's weekly 8/22 98- and 100-strike calls, where a collective 60,241 contracts have changed hands -- mostly at the ask price, hinting at buyer-driven activity. IV is up at both strikes, and volume outstrips open interest at the lower-strike call, making it safe to assume new positions are being initiated.

The in-the-money 98-strike calls are being purchased for a volume-weighted average price (VWAP) of $1.17, making breakeven at this Friday's close -- when the options expire -- $99.17 (strike plus VWAP). Meanwhile, breakeven for the out-of-the-money 100-strike calls is $100.33 (strike plus VWAP of $0.33). Not only does this represent a new annual high for AAPL, but it sits just 0.4% south of the security's record peak of $100.72, tagged on Sept. 21, 2012. Gains for both sets of option traders are theoretically unlimited beyond the respective breakeven marks, while losses are limited to the initial premium paid, should Apple Inc. (NASDAQ:AAPL) settle south of the strikes at week's end.


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Most Active Options Update: MannKind Corporation (MNKD)

MannKind Corporation option bulls are betting on a strong performance this week

by 8/18/2014 10:50 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 is MannKind Corporation (NASDAQ:MNKD), as call volume on the biotech stock is elevated to start the week.

Most Active Options Table

More than 9,600 calls changed hands on MannKind Corporation during the first hour of today's session, representing 1.14 times the expected intraday volume. The most active option is the weekly 8/22 7-strike call, where 2,421 contracts have crossed the tape.

With only 778 contracts in open interest at this short-term option, it's safe to assume new calls are being opened here today. Plus, 77% of the volume has traded at the ask price, and implied volatility rose as some of the day's big block trades changed hands -- so it looks as though speculative players are initiating new bullish bets on MNKD today.

Based on the option's volume-weighted average price (VWAP) of $0.21, breakeven at this Friday's close will be $7.21 (strike price plus VWAP). At last check, MNKD is up 2.6% to trade at $7.04, so today's short-term option bulls are betting on the shares to gain more than 2.4% by week's end.

Last week brought some major fundamental developments for MNKD, including a deal with Sanofi SA (ADR) (NYSE:SNY) that could be worth up to $925 million. That news helped to overshadow a wider-than-forecast second-quarter loss for MNKD.

On the charts, MannKind Corporation (NASDAQ:MNKD) is in the process of bouncing from its 200-day moving average. The stock could now be establishing support atop the $7 level, which previously served as resistance back in April.


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Oracle Corporation (ORCL) Put Seller Targets Technical Support

Oracle Corporation's weekly 9/26 39-strike put was sold to open on Friday

by 8/18/2014 10:01 AM
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Put writing has been a popular strategy in Oracle Corporation's (NYSE:ORCL) options pits of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the past 10 sessions, in fact, speculators on these exchanges have sold to open 2.20 puts for each one they've purchased.

This trend continued last Friday, where more than half of all the ORCL put volume consisted of a massive block of 11,767 weekly 9/26 39-strike puts that were sold to open for $0.53 apiece, resulting in an initial credit of $623,651 (number of contracts * premium collected * 100 shares per contract). This also represents the maximum potential reward on the play, should ORCL finish north of $39 at the close on Friday, Sept. 26. Should the stock breach the strike price, though, the put writer could be at risk of assignment, and face potentially steep losses. At last check, shares of ORCL were lingering near $40.70.

One of the main directives given to those implementing a short-put trade is to look for potential areas of technical support, and it appears Friday's put seller did just that. Specifically, the equity has been ushered higher by its 140-day moving average for nearly a year, and last week, this rising trendline emerged as a steady layer of support. What's more, this moving average currently coincides with the round-number $40 mark, as well as a heavy accumulation of put open interest in the front-month series of options, which could reinforce this area as a foothold in the near term.

Meanwhile, Oracle Corporation (NYSE:ORCL) is tentatively slated to unveil its fiscal first-quarter earnings report the week of Sept. 15. Over the past four quarters, the security has averaged a single-session post-earnings gain of 0.3%, which widens to 0.6% when going out one week.


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Most Active Options Update: Apple Inc. (AAPL)

One Apple Inc. option trader took a conservative approach to bet on new highs

by 8/15/2014 2:33 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest options volume during the past 10 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 Apple Inc. (NASDAQ:AAPL), as one trader rolls the dice on a slow churn higher over the next several weeks.

Most Active Options Table

After hitting a fresh 52-week peak of $99.44 in late July, shares of AAPL entered a brief period of consolidation. However, a sharp bounce off its 40-day moving average last Friday helped the security resume its longer-term uptrend, with AAPL last seen lingering near $97.45. Against this backdrop, one modestly bullish bettor today is gambling on the stock to hit another technical milestone in the near term, but is bracing for resistance near the century mark.

Shortly after the open, one massive block of 20,228 weekly 9/12 101-strike calls was sold for $1.17 apiece, while a 10,114-contract lot of weekly 9/12 97-strike calls was simultaneously bought for $2.89 each, resulting in an initial net debit of $0.55 ($2.89 - [$1.17 *2]) per trio of calls. Data from the International Securities Exchange (ISE) confirms the initiation of new positions.

By implementing the call ratio spread, this trader was able to reduce her cost of entry by collecting premium on the sold calls. However, she is also incurring more risk, compared to initiating a long call spread, as half of the short calls remain uncovered. In other words, if AAPL rallies past $101 -- uncharted territory for the equity -- over the next four weeks, she could be at risk of assignment, and face theoretically unlimited losses. However, should AAPL settle south of $97 at expiration, the most she stands to lose is the initial net debit of $0.55.

On the reward side, the speculator stands to profit if the stock expires anywhere between the lower breakeven rail of $97.55 (bought strike plus net debit) and $101. Ideally, though, she wants Apple to settle squarely at $101 at the close on Friday, Sept. 12, which will allow her to pocket the maximum potential reward of $3.45 (difference between the strikes less the net debit).

On the fundamental front, Apple Inc. (NASDAQ:AAPL) announced today it has started using data centers in China to store the personal information of some if its Chinese users. This is a first for the tech titan, with hopes that it will improve the service capacity of its iCloud.


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Marathon Oil Corporation (MRO) Put Buyers See Short-Term Sell-Off

Marathon Oil Corporation option skeptics are busy this afternoon

by 8/15/2014 2:30 PM
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Marathon Oil Corporation (NYSE:MRO) options volume is running at triple the normal intraday rate this afternoon, with calls and puts roughly neck and neck. What's more, the stock's 30-day at-the-money (ATM) implied volatility (IV) has spike 7.9% to 20.8%, signaling elevated demand for short-term options.

MRO's most active option is the weekly 8/22 39-strike put, where nearly 5,400 contracts are on the tape. More than two-thirds have been exchanged at the ask price, IV is solidly higher, and data from the International Securities Exchange (ISE) confirms buy-to-open activity.

By scooping up these ATM puts at a volume-weighted average price (VWAP) of $0.72, today's speculators anticipate MRO will descend below $38.28 (strike less VWAP) by next Friday's closing bell, when the weekly options expire. Additional gains will accrue on a move down to zero, while the most the buyers risk losing is the initial premium paid, should the equity be perched at or atop the strike at expiration.

On the charts, Marathon Oil Corporation (NYSE:MRO) is little changed this afternoon, at $39.01. Year-to-date, however, the shares have tacked on a healthy 10.5%, and appear to have found a foothold over the past week at the $39 level.


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