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Advanced Micro Devices, Inc. (AMD) Targeted By Pre-Earnings Bears

Advanced Micro Devices, Inc. (AMD) will report fourth-quarter earnings after tonight's close

by 1/20/2015 2:40 PM
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Advanced Micro Devices, Inc. (NASDAQ: AMD) is slated to unveil its fourth-quarter earnings results after tonight's close. Ahead of the event, the stock has plunged 6.3% to churn near $2.24 -- after earlier hitting a fresh two-year low of $2.19 -- and put volume is soaring. Specifically, puts are trading at four times what's typically seen at this point in the day, and are outpacing calls by a 6-to-1 ratio.

A significant portion of the day's activity occurred when a 15,000-contract lot of April 2.50 puts crossed the tape at the same time that two blocks totaling 10,000 contracts went off at the April 2 put. One theory suggested by Trade-Alert is that a speculator sold to close her now in-the-money April 2.50 puts and bought the April 2 puts, as she rolls down her bearish bet.

This wouldn't be too much of a stretch for AMD options traders. In fact, over the past two weeks, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open more than 27 puts for each call. What's more, the resultant put/call volume ratio of 27.38 sits at an annual bearish peak.

Echoing this put-skewed bias is AMD's Schaeffer's put/call open interest ratio (SOIR) of 3.76. Not only does this show that put open interest nearly quadruples call open interest among options set to expire in three months or less, but it rests higher than all other readings taken in the past 12 months. In other words, short-term speculators are more put-heavy now on AMD than they've been at any other point during the past year.

Historically speaking, Advanced Micro Devices, Inc. (NASDAQ: AMD) tends to make big moves in the wake of its earnings results. After unveiling its quarterly report last July, for example, the stock shed 16.2% in the subsequent session. The quarter prior, meanwhile, the equity notched an 11.7% single-session post-earnings gain. This time around, the options market is expecting a move in the 16.1%-19% range, based on the respective pricing of AMD's weekly 1/23 2- and 2.50-strike straddles.


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Pre-Earnings Bears Ante Up on IBM

IBM Corp. (IBM) has traditionally struggled in the aftermath of its earnings reports

by 1/20/2015 2:25 PM
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IBM Corp. (NYSE:IBM) is sitting 1.8% lower this afternoon at $154.34, and is scheduled to report fourth-quarter earnings in less than two hours. Ahead of this event, options trading is running at roughly 1.4 times the usual intraday pace, while the stock's 30-day at-the-money implied volatility has popped 3.5% to 26% -- signaling elevated demand for short-term strikes.

IBM's most active option is the weekly 1/23 155-strike put, which is seeing buy-to-open activity. By purchasing these positions, the speculators are wagering on additional downside through this Friday's closing bell -- when the weekly series expires.

Looking back, however, IBM hasn't ended a week south of $155 since early 2011. As such, delta on the now in-the-money put is negative 0.51, meaning the options market is giving the contract about a 1-in-2 chance of being in the money Friday night.

As alluded to earlier, IBM will deliver quarterly results this evening, and this could be a boon for today's option bears. Over the last eight quarters, the shares have averaged a single-session post-earnings loss of 2.8%, including a 7.1% dive last October.

Taking a step back, today's penchant for short-term puts is just business as usual for IBM Corp. (NYSE:IBM). The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.03 ranks in the 74th percentile of its annual range.

Weekly Chart of IBM since January 2011


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Bulls Pile On as Smith & Wesson Holding Corp (SWHC) Rallies

Smith & Wesson Holding Corp (SWHC) is up nearly 20% after raising its quarterly guidance

by 1/20/2015 11:59 AM
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With earnings season in full swing, a number of firms are weighing in on their quarterly guidance. One such name is Smith & Wesson Holding Corp (NASDAQ:SWHC), which upped its fiscal third-quarter and full-year outlook, sending the shares 17.9% higher to $11.81. Options traders are responding in kind, scooping up calls at 18 times the average intraday pace. Additionally, the stock's 30-day at-the-money (ATM) implied volatility is up 7.7% to 36.1%, signaling elevated demand for SWHC's short-term contracts.

Drilling down, the security's February 12 call has seen the most action, and all signs suggest buy-to-open activity. Amid today's surge, delta on the call has jumped to 0.46 from 0.09 at last Friday's close, pointing to an increased probability of an in-the-money finish at the close on Friday, Feb. 20, when front-month options expire.

From a wider sentiment perspective, today's accelerated call activity marks a change of pace in the equity's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SWHC's 50-day put/call volume ratio of 1.58 ranks in the bearishly skewed 92nd annual percentile. Additionally, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.70 rests higher than all other readings taken in the past year.

This bearish positioning aligns more accurately with SWHC's technical backdrop, with the shares off nearly 32% since hitting a seven-year high of $17.28 on June 11. With almost 22% of Smith & Wesson Holding Corp's (NASDAQ:SWHC) float sold short, a portion of today's activity at the February 12 call could be a result of shorts hedging against any additional short-term upside.


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Speculators See Extended Rally for The Mosaic Company (MOS)

Mosaic Co's (MOS) weekly calls are in high demand

by 1/20/2015 11:34 AM
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Mosaic Co (NYSE:MOS) gapped higher to $47.55 this morning, after raising its fourth-quarter forecast -- also providing a halo lift for sector peer Potash Corp./Saskatchewan (USA) (NYSE:POT). This revised outlook for MOS -- which was last seen 2.1% higher at $46.96 -- has translated into increased activity in its options pits, especially among the bulls.

Today's speculators are primarily targeting calls, which are trading at three times what's normally seen at this point in the day. In fact, nine of the stock's 10 most active strikes are calls, with the weekly 1/23 47.50 and 48 strikes attracting notable attention. It appears activity at these strikes is mostly of the buy-to-open variety, meaning speculators are eyeing an extended rally for MOS, hoping the stock lands atop the respective strikes by this Friday's close, when the contracts expire.

Elsewhere, analyst sentiment is mixed toward MOS, as six analysts rate the stock a "buy" or better, with seven handing out "holds," and two deeming it a "strong sell." However, should the security please today's bullish bettors and continue its upward movement, future price-target hikes could come. The stock is now only a chip-shot from its average 12-month price target of $49.95.

For the most part, Mosaic Co (NYSE:MOS) has been a technical laggard, dropping 2.8% year-over-year. Still, today's price action has the security poised to settle atop its 200-day moving average for just the second time since August, and on pace to topple its 80-week moving average for only the second time since July 2013.

Weekly Chart of MOS since July 2013 With 80-Week Moving Average

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Buyout Buzz Sends Option Bulls to 3D Systems Corporation (DDD)

3D Systems Corporation (DDD) option traders are betting on a quick surge

by 1/20/2015 11:14 AM
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Short-term option bulls are blitzing 3D Systems Corporation (NYSE:DDD) today, amid unconfirmed buyout buzz. DDD calls are trading at five times the average intraday clip, and have outpaced puts by a margin of more than 3-to-1.

Attracting the most attention are the weekly 1/23 calls -- specifically, buy-to-open activity has been detected at the 29, 29.50, and 30 strikes. In fact, implied volatility has soared by more than 23 percentage points at each strike, reflecting the growing demand.

By purchasing the calls to open, the buyers expect DDD to be sitting north of the respective strikes by the close on Friday, when the contracts expire. At last check, the equity was 0.2% higher at $28.80.

Today's affinity for short-term calls over puts marks a shift in sentiment for 3D Systems Corporation (NYSE:DDD). The security's Schaeffer's put/call open interest ratio (SOIR) of 1.30 stands higher than 92% of all other readings from the past year, implying that near-term options traders have rarely been more put-skewed. Echoing that, short interest accounts for nearly one-third of the stock's total available float, representing more than two weeks' worth of pent-up buying demand, at DDD's average pace of trading.


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