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Options Check-Up: Chesapeake Energy, LinkedIn Corp, and Zynga Inc

Analyzing recent option activity on CHK, LNKD, and ZNGA

by 12/17/2014 8:19 AM
Stocks quoted in this article:

Among the stocks attracting attention from options traders lately are oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK), professional networking platform LinkedIn Corp (NYSE:LNKD), and internet gaming guru Zynga Inc (NASDAQ:ZNGA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on CHK, LNKD, and ZNGA.

  • CHK has had a less-than-stellar year, shedding nearly 20% year-to-date, despite a 1.3% gain yesterday to close at $17.45. Unsurprisingly, sentiment in the equity's options pits is decidedly bearish. Chesapeake Energy Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.11 is at an annual peak, pointing to a healthier-than-usual appetite for long puts over calls of late. The stock's short-term options are currently expensive, on a volatility basis, per its Schaeffer's Volatility Index (SVI) of 68%, which ranks in the 84th percentile of its 52-week range.

  • Shares of LNKD have added roughly 58% since their early May bottom near $140, ushered higher atop their 10-week and 20-week moving averages. Even with this recent growth, the stock dropped 1.1% yesterday amid broad-market headwinds to sit at $215.57. Options traders remain bearish on LinkedIn Corp, with its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.06 ranking higher than 85% of all similar readings taken in the past year. From a contrarian perspective, an unwinding of pessimism in the options pits could translate into more upside for LNKD. Per the equity's SVI of 36% -- which is in the 22nd annual percentile -- LNKD's near-term options are fairly cheap, from a volatility standpoint. Furthermore, the stock's Schaeffer's Volatility Scorecard (SVS) of 87 indicates the shares have tended to make outsized moves over the past year, relative to what the options market has priced in.

  • ZNGA has taken a dive this year, shedding nearly 38% of its value. Continuing this trend, yesterday the stock lost 3.1% to close at $2.36. Despite this extended slide, speculators have remained staunchly bullish. Per the equity's 50-day ISE/CBOE/PHLX call/put volume ratio, 8.51 calls have been bought to open for every put. Additionally, this ratio is in the 83rd percentile of its annual range, showing a bigger-than-usual preference for bullish bets over bearish. Zynga Inc's short-term options can be had at a relative bargain, on a volatility basis, as its SVI of 62% ranks in the 27th percentile of its annual range.

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Round-Number Calls Active On Integrated Device Technology Inc (IDTI)

Integrated Device Technology Inc toppled $20 for the first time in nearly 11 years

by 12/16/2014 2:34 PM
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Integrated Device Technology Inc (NASDAQ:IDTI) rallied to $20.15 earlier -- its loftiest perch since January 2004 -- but was last seen lingering near $19.69. Option traders, however, are betting on the stock to rally back above this round-number mark over the next five weeks, by buying to open the January 2015 20-strike call, which is easily IDTI's most active option.

Should the stock fail to topple the strike by January options expiration, the most the speculators stand to lose is the initial premium paid. However, it appears these traders are willing to pay up for their bullish bets. Specifically, implied volatility on the January 2015 20-strike call is inflated relative to the security's 30-day historical volatility (56.7% vs. 36.1%), meaning premium is relatively expensive at the moment.

Technically speaking, the stock has been a standout in 2014, and has nearly doubled in value. More recently, Integrated Device Technology Inc (NASDAQ:IDTI) has put in a stellar performance against the S&P 500 Index (SPX), outpacing the broad-market barometer by nearly 38 percentage points over the past two months.

Daily Chart of IDTI Since January 2014

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Exxon Mobil Corporation (XOM) Rebound Lures Option Bulls

Exxon Mobil Corporation hit a 14-month low earlier, but has since recovered

by 12/16/2014 2:03 PM
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After earlier touching an annual low of $86.19, Exxon Mobil Corporation (NYSE:XOM) was last seen 0.4% above breakeven at $87.24. This wild price movement -- which is reflective of today's broad-market volatility -- has brought a number of options traders to the table. In fact, calls are being exchanged at double the usual intraday rate, and the stock's 30-day at-the-money implied volatility has risen 2.5% to 29.2%, suggesting short-term strikes are in demand.

Taking the top spot is XOM's January 2015 92.50-strike call, where 18,339 contracts -- including a sweep of 15,000 -- have changed hands. Based on a number of factors, it appears traders are placing fresh bullish bets, anticipating the shares will rally past $92.50 by January options expiration.

This preference for call buying is a break from the recent norm, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the last 10 days, traders have bought to open nearly two XOM puts for every call, resulting in a put/call volume ratio of 1.63 -- in the 86th percentile of its annual range.

This prevailing skepticism isn't surprising, given Exxon Mobil Corporation's (NYSE:XOM) longer-term struggles. Year-to-date, the equity has shed about 14% of its value.


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Twitter Inc (TWTR) Option Bulls Root for an End-of-Year Rally

Calls continue to be the options of choice on struggling Twitter Inc

by 12/16/2014 12:49 PM
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Twitter Inc (NYSE:TWTR) is down 1.6%, following a price-target cut to $45 from $55 at Evercore ISI -- although the brokerage firm maintained its "buy" rating. Nevertheless, calls are outpacing puts by a nearly 2-to-1 margin. Meanwhile, the stock's 30-day at-the-money implied volatility is up 1.5% at 49.7%, signaling elevated demand for short-term options.

Seeing the most action in TWTR's options pits today are the December 36 and weekly 12/26 41.50-strike calls. It appears the majority of the 12,887 contracts traded across these two strikes have been bought to open, as traders roll the dice on a quick bounce over the next two weeks.

From a wider sentiment perspective, today's call-skewed session just echoes the withstanding trend. Specifically, the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.44 ranks in the 88th annual percentile. Additionally, TWTR's Schaeffer's put/call open interest ratio (SOIR) of 0.60 rests below 75% of similar readings taken in the past year.

Technically speaking, however, Twitter Inc (NYSE:TWTR) has been on a steady downtrend since hitting its most recent high of $55.99 in early October, with the shares off 35.2% to trade at $36.27. Should the shares continue to struggle, a capitulation from option bulls could translate into a fresh wave of selling pressure.


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Option Bears Attack Yandex NV (YNDX) as Russian Stocks Slide

Yandex NV hit a record low earlier

by 12/16/2014 11:26 AM
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Yandex NV (NASDAQ:YNDX) is getting pummeled around midday, down 9.5% at $16 as worries intensify over the continued slide in the Russian ruble. In fact, shares of the Internet search provider touched a record low of $15.02 earlier, landing the stock on the short-sale restricted list for a second straight day. Meanwhile, put volume is surging as traders search for alternative ways to bet bearishly on the equity.

Digging deeper, YNDX puts are crossing at 11 times the expected intraday pace, and the security's 30-day at-the-money implied volatility has charged 24.1% higher to 79% -- a new annual high. The most active option is the December 15 put, which traders are buying to open in the hopes of extended losses through the end of the week, when front-month contracts expire.

This propensity for put buying, relative to call buying, is business as usual for Yandex NV (NASDAQ:YNDX). The stock's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.44 ranks near the top quartile of its annual range, suggesting speculators have had a stronger-than-usual appetite lately for bearish bets over bullish.


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