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Linn Energy LLC (LINE) Bears Active Amid Brokerage Backlash

Linn Energy LLC put volume ran at three times the average daily pace on Monday

by 12/16/2014 10:34 AM
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It was a terrible start to the week for Linn Energy LLC (NASDAQ:LINE), which shed 18.2% on Monday, after MLV & Co. reiterated a tepid "hold" rating on the shares, explaining "LINE's distribution policy appears threatened if current commodity prices persist for a significant period." Against this backdrop, the stock was sent to the short-sale restricted list, and put volume soared to three times what's typically seen, as traders looked for alternate ways to bet bearishly on the equity.

Drilling down, LINE's December and January 2015 10-strike puts saw the most action, with 9,864 contracts collectively traded here. All signs point to buy-to-open activity, as traders rolled the dice on an extended stay in single-digit territory.

In today's session, the shares fell to a record low of $9.17 out of the gate -- but were last seen 10.7% higher at $10.88, as the company's fresh influx of cash overshadows another round of dreary analyst attention. Specifically, Baird cut its rating on the stock to "neutral" from "outperform," and slashed its price target to $10 from $21, while Raymond James dropped its target price by $15 to $18.

Given yesterday's sharp sell-off, though, LINE's 14-day Relative Strength Index (RSI) is resting at 16 -- deep in oversold territory -- suggesting a near-term bounce may have been in the cards. Should the stock resume its downtrend, though, more bearish brokerage notes could be on the horizon. At present, five out of eight covering analysts maintain a "buy" or better rating toward Linn Energy LLC (NASDAQ:LINE), versus three "holds" and not a single "sell."


Whole Foods Market, Inc. (WFM) Buyout Buzz Spurs Bullish Betting

Rumors abound that Whole Foods Market, Inc. is a takeover target

by 12/16/2014 10:16 AM
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Whole Foods Market, Inc. (NASDAQ:WFM) calls flew off the shelves yesterday, amid unconfirmed rumors of a possible buyout attempt from Publix Super Markets Inc. Specifically, call volume nearly tripled the intraday norm, and the stock's 30-day at-the-money implied volatility spiked 6.9% to 24.8%, signaling elevated demand for short-term contracts.

Digging deeper, buy-to-open activity was detected at the out-of-the-money December 49.50 and 50 calls. These traders expect WFM to end the week -- when the front-month options expire -- atop the respective strikes.

Technically speaking, shares of the organic grocer have been on a roll recently. Since the end of October, in fact, WFM has tacked on more than 23% to its current perch at $48.47. On a similar note, over the last 40 sessions, the equity has outperformed the broader S&P 500 Index (SPX) by approximately 25 percentage points.

An unwinding of negativity on Wall Street could spell additional gains. For instance, 9.5% of Whole Foods Market, Inc.'s (NASDAQ:WFM) float is sold short, which would take almost nine sessions to repurchase, at the stock's average daily trading volume. Also, 12 out of 21 analysts covering the shares have doled out a "hold" or worse rating. In other words, WFM could benefit from a short-covering rally and/or a round of upgrades.


Options Check-Up: First Solar, Kandi Technologies, and Spirit Airlines

Analyzing recent option activity on FSLR, KNDI, and SAVE

by 12/16/2014 8:42 AM
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Among the stocks attracting attention from options traders lately are alternative energy concern First Solar, Inc. (NASDAQ:FSLR), China-based electric automaker Kandi Technologies Group Inc (NASDAQ:KNDI), and discount airline Spirit Airlines Incorporated (NASDAQ:SAVE). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on FSLR, KNDI, and SAVE.

  • FSLR has struggled this year, shedding nearly 24% year-to-date to settle at $41.66 on Monday, after hitting a new annual low of $41.44 earlier in the day. Unsurprisingly, sentiment in the equity's options pits is decidedly bearish. First Solar, Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 1.80 is an annual peak, ranking higher than 100% of all similar readings taken in the past year. However, per its Schaeffer's Volatility Index (SVI) of 48% -- which is in its 36th annual percentile -- FSLR's near-term options are relatively cheap, from a volatility perspective.

  • KNDI has had an up-and-down year. Despite yesterday's 7% loss, the stock has risen more than 47% in the past 52 weeks to land at its current perch of $11.58. However, options traders are bearish on Kandi Technologies Group Inc, with its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.09 ranking higher than 95% of all similar readings within the past year. Nonetheless, the stock's short-term options are inexpensive, on a volatility basis, per its SVI of 83% -- which ranks in the 27th percentile of its 52-week range.

  • Shares of SAVE have been on a tear this year, adding over 51%. More recently, though, disappointing traffic data sent the stock reeling, with SAVE closing Monday at $68.59 -- down 19.6% from its Dec. 8 high of $85.35. However, speculators have been betting on quick turnaround. Per the equity's 10-day ISE/CBOE/PHLX call/put volume ratio, 7.72 calls have been bought to open for every put. Additionally, this ratio lands in the 93rd percentile of its annual range, suggesting an increasing desire for bullish bets over bearish. Spirit Airlines Incorporated's short-term options are pricing in higher-than-usual volatility expectations, as its SVI of 47% ranks in the 65th percentile of its yearly range.


Pre-Earnings Call Sellers Swoop In on VeriFone Systems Inc (PAY)

VeriFone Systems Inc's January 2015 36-strike call is being sold to open today

by 12/15/2014 2:06 PM
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It's a busy day in VeriFone Systems Inc's (NYSE:PAY) options pits, as last-minute traders line up their bets ahead of the company's after-the-close quarterly earnings report. Specifically, 26,000 contracts have changed hands, 17 times what's typically seen at this point in the day.

Drilling down, the bulk of the action is centered at PAY's January 2015 36-strike call, where speculators appear to be selling to open the contracts for a volume-weighted average price of $0.75. This is the most the traders stand to gain, should PAY remain south of the strike through January options expiration. However, there could be an ulterior motive for today's call selling, with traders hoping to capitalize on a volatility crush in the wake of tonight's scheduled announcement.

On the charts, VeriFone Systems Inc (NYSE:PAY) has put in a strong showing over the past year, tacking on more than 32% to trade at $33.02. Assisting the stock in its trek higher has been its 50-week moving average, and this trendline was key in containing PAY's last two pullbacks. The security could be poised to bounce from here after the firm unveils its fiscal fourth-quarter results tonight, considering PAY has averaged a single-session post-earnings gain of 3.5% following its last four turns under the earnings spotlight.

Daily Chart of PAY Since December 2013 With 50-Day Moving Average


Orexigen Therapeutics, Inc. (OREX) Bulls Wager On Sharp Gains

Orexigen Therapeutics, Inc. has been an on-chart dynamo since mid-October

by 12/15/2014 2:06 PM
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Orexigen Therapeutics, Inc. (NASDAQ:OREX) has surged 3.8% to trade at $5.96, and calls are flying off the shelves at almost nine times the expected intraday clip. By the numbers, more than 7,700 contracts are on the tape, compared to 821 puts.

Buy-to-open activity is detected at the out-of-the-money December 7 call, where 3,680 contracts have been exchanged -- making it OREX's most active option. In other words, these traders are gambling on the stock to continue running higher through the end of this week, when front-month options expire.

Turning to technicals, OPK has rebounded sharply since hitting a two-year low of $3.11 in mid-October. Specifically, the stock has rocketed nearly 92% higher in roughly two months, during which it has outperformed the broader S&P 500 Index (SPX) by 32.6 percentage points.

If Orexigen Therapeutics, Inc. (NASDAQ:OREX) can maintain this positive momentum, the shares could benefit from a potential short-covering rally. After all, 32% of the equity's float is sold short, which would take more than three weeks to buy back, at typical daily trading volumes.


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