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Call Buyers Take Over Gogo Inc (GOGO) Options Pits

A Gogo Inc trader is either betting on, or hedging against, a huge rally

by 7/17/2014 2:47 PM
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Gogo Inc (NASDAQ:GOGO) hasn't done much on the charts today -- fractionally lower at $16.08 -- but its options pits are busy. In fact, calls are changing hands at six times the usual intraday clip. Short-term contracts are in high demand, too, as the stock's 30-day at-the-money implied volatility has shot 9.6% higher to 83.2%.

GOGO's most active strike is its soon-to-be front-month August 22 call, where roughly 10,000 contracts have traded -- handily outstripping open interest. The majority of these calls crossed as an 8,010-contract sweep, at the ask price of $0.25 apiece. In other words, the lot was likely bought to open for $200,250 (number of contracts * premium paid * 100 shares per contract) -- which represents the maximum risk on the trade, should GOGO be sitting below the strike when August options expiration rolls around. By contrast, gains are theoretically unlimited north of the at-expiration breakeven mark of $22.25 (strike plus premium paid).

Another strategy may be afoot here, however. Given the deep out-of-the-money status of the calls, GOGO's high level of short interest (i.e., nearly one-third of its float), and the stock's year-to-date deficit of 35.2%, it's possible some of the call buyers are short sellers looking for a near-term hedge -- especially ahead of earnings.

Speaking of which, Gogo Inc (NASDAQ:GOGO) is tentatively scheduled to report second-quarter results during the week of Aug. 4. The Street is projecting a per-share loss of 23 cents from the in-flight Internet provider -- a vast improvement over last year's 85-cents-per-share loss.


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Ford Motor Company (F) Bulls Encouraged By Multi-Year High

Ford Motor Company's July 18 call continues to draw favor from option traders

by 7/17/2014 2:23 PM
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Ford Motor Company (NYSE:F) tagged a three-year peak of $18.08 earlier -- after announcing plans to expand its presence in the Middle East and Africa -- but was last seen up 0.6% to trade at $17.91. Against this backdrop, call players continue to dominate the stock's options pits, with the contracts outpacing puts by a nearly 5-to-1 margin. Short-term contracts are in demand, per the equity's 30-day at-the-money implied volatility (IV), which is up 4.7% at 21.6%.

The most sought-after F strike is the July 18 call, and it appears a number of eleventh-hour option bulls are keeping the faith that Ford can rally back up to today's technical milestone by tomorrow's close. The majority of the 13,145 contracts traded here did so at the ask price, IV is up 2.9 percentage points, and data from the International Securities Exchange (ISE) confirms buy-to-open activity.

Today's traders are paying a volume-weighted average price (VWAP) of $0.07 for the July 18 calls, making breakeven at tomorrow's close $18.07 (strike plus VWAP). Gains are theoretically unlimited beyond this point, while losses are capped at the premium paid, should F finish the week south of the strike price.

Turns out today's option players haven't been the only ones targeting F's July 18 call. At present, this strike houses peak call open interest of 51,579 contracts in the front-month series. In the very near term, this area could translate into an options-related ceiling for Ford Motor Company (NYSE:F), as the hedges related to these bets unwind ahead of tomorrow's close, when July options expire.


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Groupon Inc (GRPN): Why Everyone's Watching This Level

Groupon Inc has seen both buying and selling activity at its August 7 call strike

by 7/17/2014 1:34 PM
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Call options have been a popular choice on daily deals site Groupon Inc (GRPN) lately, according to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the past 10 sessions, GRPN has racked up a call/put volume ratio of 13.83 on the ISE, CBOE, and PHLX. This ratio arrives in the 99th percentile of its annual range, as speculative players have rarely shown a greater preference for bullish bets over bearish on the stock.

From a broader view, traders on the ISE, CBOE, and PHLX have bought to open 5.24 calls for every put on GRPN during the past 50 trading days. Again, this ratio outranks 99% of other daily readings within the last 52 weeks -- marking a near-peak of call-buying activity, relative to puts.

Returning to that 10-day time frame, GRPN's August 7 strike has experienced the biggest surge of open interest during this period. More than 6,000 contracts have been added to open interest at the August 7 call over the past two weeks, and there are now a total of 17,239 contracts in residence here. As a result, the August 7 strike is now home to peak call open interest for the series.

It's interesting to note that the activity at this narrowly out-of-the-money strike has been a fairly even mix of buy-to-open and sell-to-open volume, according to the ISE, CBOE, and PHLX. Traders who sold the calls are looking for GRPN to remain below $7 through August expiration, while those who bought the calls are betting on the stock to surmount this strike within the next four weeks.

However, August 7 call buyers could have an ulterior motive. Short interest on GRPN rose nearly 6% during the most recent reporting period, and now accounts for 19% of the equity's float. At the stock's average daily trading volume, it would take more than five sessions for all of these bearish bets to be covered. With short interest and buy-to-open call volume both on the rise, it's possible that short sellers have been buying calls in order to limit their upside risk -- not to bet on a rally for GRPN.

From a technical perspective, the $7 level has played an important role for Groupon Inc (NASDAQ:GRPN). This region provided support through the month of April, but has since switched roles to act as resistance -- making the stock's 7-strike call a logical place for both premium sellers and shorts to focus their attention. At last check, GRPN is fractionally lower at $6.27.

Daily Chart of GRPN since December 2013


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Options Radar: General Motors, AT&T Inc., and Intel Corporation

Reviewing notable options activity on General Motors Company, AT&T Inc., and Intel Corporation

by 7/17/2014 1:18 PM
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Option traders have taken a shine to automaker General Motors Company (NYSE:GM), as well as blue chips AT&T Inc. (NYSE:T) and Intel Corporation (NASDAQ:INTC). Here's a look at how speculators have been placing their bets on these three names today.

  • General Motors Company (NYSE:GM) is down 0.7% at $37.23, as CEO Mary Barra faces another recall-related firestorm on Capitol Hill. Against this backdrop -- and ahead of the company's turn in the earnings spotlight next Thursday, July 24 -- option players are picking up short-term puts today. Specifically, it looks like traders are buying to open the equity's weekly 8/1 36.50-strike put, which will move into the money if GM backpedals beneath $36.50 by the close on Friday, Aug. 1, when the options expire. While the security's 30-day at-the-money (ATM) implied volatility (IV) has edged 3.1% higher to 22.6% today, GM's short-term options are still relatively inexpensive. The stock's Schaeffer's Volatility Index (SVI) of 22% stands higher than just 26% of all other readings of the past year.

  • AT&T Inc. (NYSE:T) will also report earnings next week -- after the close on Wednesday, July 23, to be exact. Option traders are once again favoring T calls, which are flying off the shelves at nearly twice the typical intraday rate. Digging deeper, speculators are buying to open the weekly 7/25 36.50-strike call, which is the most active option by a landslide. The buyers may be gambling on another earnings win for T, which has matched or surpassed the Street's bottom-line estimates in six of the past eight quarters. At last check, T is lower along with the broader equities market, down 0.5% at $36.26.

  • Finally, Intel Corporation (NASDAQ:INTC) is taking a breather from its post-earnings quest for record highs, down 1.8% at $34.02. INTC's short-term options are in high demand, as the stock's 30-day ATM IV has surged 7% to 18%. Overall options volume is running at three times the intraday norm, though calls have outpaced puts by a margin of more than 2-to-1. Short-term bulls are circling the July 34.50 call, buying the options to open amid hopes for INTC to climb back atop the strike by tomorrow's close, when front-month options expire. Slightly longer-term bulls are buying to open the September 36 call to gamble on even higher highs for the Dow component over the next couple of months.

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Most Active Options Update: Micron Technology, Inc. (MU)

Micron Technology, Inc. puts popular amid sector-related slip

by 7/17/2014 12:59 PM
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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 this afternoon is Micron Technology, Inc. (NASDAQ:MU). Falling off the list since last time were Gilead Sciences, Inc. (NASDAQ:GILD), JPMorgan Chase & Co. (NYSE:JPM), and MannKind Corporation (NASDAQ:MNKD).

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Micron Technology, Inc. is feeling the heat of sector peer SanDisk Corporation's (NASDAQ:SNDK) dreary revenue outlook today, with the shares lower at last check. However, considering the stock has rallied 53% year-to-date -- and yesterday tagged a 12-year peak of $34.85, which brought MU north of its upper Bollinger Band -- a near-term pullback may have been in the cards. Eleventh-hour put players are flooding the equity's options pits amid this slip, as they scramble to place bets on additional losses through tomorrow's close.

Diving deeper, the security's July 33.50 put is the most active MU strike this afternoon. The majority of the 18,343 contracts traded here have done so on the ask side, and volume easily outstrips open interest -- both signs of buy-to-open activity. Breakeven at tomorrow's close is $33.27 (strike less the volume-weighted average price of $0.23), and gains for the put buyers will accumulate on a move all the way down to zero. Risk, meanwhile, is limited to 100% of the premium paid, should the equity close out the week north of the strike price.

In spite of the stock's withstanding technical trajectory, long puts have been popular in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the stock's 50-day put/call volume ratio of 0.39 ranks 2 percentage points from a bearish peak.

In the front-month series, specifically, a lofty accumulation of put open interest is currently housed at MU's underfoot July 33 strike. This could serve as options-related support for the stock through week's end, as the more than 9,000 contracts that reside here unwind through tomorrow's close. In fact, today's pullback was contained just north of this area when the equity hit an intraday low of $33.07, with Micron Technology, Inc. (NASDAQ:MU) last seen lingering near $33.26.


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