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DuPont (DD): Will Today's Rally Run Out of Steam?

E I Du Pont De Nemours And Co's weekly 9/26 68.50-strike put is being bought to open today

by 9/17/2014 11:00 AM
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E I Du Pont De Nemours And Co (NYSE:DD) -- more commonly referred to as DuPont -- is in rally mode this morning, following calls by hedge fund Trian Partners for the company to split into two. In fact, with today's 4.2% pop, DD is easily outperforming all other Dow Jones Industrial Average components, including fellow headline-grabber The Boeing Company (NYSE:BA). In the stock's options pits, though, a number of speculators are betting on the security to run out of steam in the near term.

Taking a step back, puts are trading at 13 times the intraday average pace, and according to the equity's 30-day at-the-money implied volatility -- which is up 12.4% to 14.8% -- traders are showing a preference for DD's short-term contracts. Specifically, the weekly 9/26 68.50-strike put is DD's most sought-after option, where 5,858 contracts have changed hands thus far. Almost all of these puts traded at the ask price, and only 10 contracts are currently in residence here, making it safe to assume new positions are being purchased.

In order for today's put buyers to profit, DuPont must be sitting south of breakeven at $67.73 (strike less the volume-weighted average price of $0.77) at next Friday's close, when the weekly series expires. Gains will accumulate below here, while risk is limited to 100% of the premium paid, should the security close north of $68.50 at expiration.

Heading into today's session, E I Du Pont De Nemours And Co (NYSE:DD) was up a slight 1.3% year-to-date, with the stock's recent rally attempts rejected by its 80-day moving average. Thanks to this morning's jump -- which has the blue chip trading at $68.62 -- the equity is now sitting roughly 3.4% above this trendline, which is currently located at $66.31.


Sprint Corporation (S) Option Bears Raise the Stakes

Sprint Corporation put volume ran at three times the daily average yesterday

by 9/17/2014 10:09 AM
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Sprint Corporation (NYSE:S) has had a terrible run on the charts, with the shares off 37% year-to-date to churn near $6.75. What's more, the equity's most recent rally attempt was quickly rejected by its descending 60-day moving average -- a trendline that has been ushering S lower since early June. Against this backdrop, put players have emerged, as evidenced by the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.90, which ranks in the 93rd percentile of its annual range. Simply stated, short-term speculators are more put-skewed than usual toward S.

On Tuesday, puts traded at three times the expected daily amount, and outpaced calls by a more than 4-to-1 margin. While it appears one speculator may have rolled her bearish bet down to the November 6 put from the November 8 put, most active was Sprint's October 6 put, where 10,371 contracts changed hands -- nearly all at the ask price, hinting at buyer-driven activity. Implied volatility edged higher, and open interest rose overnight, making it safe to assume a fresh batch of bearish bets was initiated.

The October-dated puts were purchased for a volume-weighted average price (VWAP) of $0.15, making breakeven at the close on Friday, Oct. 17 -- when back-month options expire -- $5.85 (strike less VWAP). Profit will accrue south of here, while losses are capped at the initial premium paid, should S settle north of the strike at expiration.

Off the charts, the pricing wars between telecom concerns are heating up in the wake of Apple Inc.'s (NASDAQ:AAPL) unveiling of the new iPhone 6 models. At Sprint Corporation (NYSE:S), specifically, the company is reducing the cost of its data plan for those using the iPhone 6.


Options Check-Up: Angie's List Inc, Citigroup Inc, and Cree, Inc.

Analyzing recent option activity on ANGI, C, and CREE

by 9/17/2014 8:10 AM
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Among the stocks attracting attention from options traders lately are online review issue Angie's List Inc (NASDAQ:ANGI), financial firm Citigroup Inc (NYSE:C), and lighting expert Cree, Inc. (NASDAQ:CREE). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on ANGI, C, and CREE.

  • After hitting an all-time low of $7.37 Tuesday, ANGI finished the day down 0.8% at $7.43, bringing its year-to-date loss to 51%. Puts have been bought to open at a faster-than-normal rate in the past 10 weeks, with the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.89 sitting only 4 percentage points away from an annual bearish peak. Short sellers have taken notice of the stock's underperformance, as roughly 20% of the equity's float is sold short. At Angie's List's average daily trading volume, it would take more than 13 sessions to cover these bearish bets. ANGI's Schaeffer's Volatility Index (SVI) is at 46%, in the 3rd annual percentile, meaning short-term options are at a bargain price, from a volatility standpoint.

  • C dropped 0.1% yesterday to finish at $52.36, amidst news of the state of Virginia suing Citigroup Inc and 12 other banks over accusations of defrauding the state's retirement fund. The shares are nearly flat in 2014, down 0.5% year-to-date, and C is backing away from the upper rail of its recent trading range between $46 and $53. The equity's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.70 ranks in the 93rd annual percentile, as traders have rarely shown a greater interest in puts relative to calls during the past year. C's SVI of 21% ranks in the 36th percentile of its annual range, showing short-term options are pricing in fairly modest volatility expectations.

  • CREE hit an annual low of $40.60 Tuesday, then recovered slightly to finish the session at $41.63, a 1.3% gain. The equity is now facing a year-to-date loss of 33.4%. Traders are showing a healthier-than-usual appetite for bearish bets for Cree, Inc., as its 10-day ISE/CBOE/PHLX put/call volume ratio comes in at 1.63, in the 98th percentile of similar readings taken over the last year. CREE's short-term options are extremely cheap from a volatility standpoint, with its SVI of 29% arriving in the 12th percentile of its annual range.


Traders Split as Vimicro International Corporation (ADR) (VIMC) Soars

Vimicro International Corporation (ADR) option volume is trading at 12 times the intraday average

by 9/16/2014 3:11 PM
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Vimicro International Corporation (ADR) (NASDAQ:VIMC) is on fire today, up 31% at $8.69 -- and earlier hit a seven-year peak of $9.38 -- after JL Warren Capital said the company could be poised to become a leader in China's video surveillance field. In the stock's options pits, overall volume has soared to 12 times what's typically seen at this point in the day. Short-term contracts are in high demand, per the equity's 30-day at-the-money implied volatility, which has jumped 29% to 128.2% -- in the 96th percentile of its annual range.

The four most active strikes target the equity's $7.50 level; specifically, the September 7.50 call and put, and the October 7.50 call and put, have garnered the most attention. The majority of the action at all four strikes has transpired on the ask side, and volume outstrips open interest -- making it safe to assume new positions are being initiated.

By buying to open the calls, traders expect VIMC to extend its lead past $7.50 through September and October options expiration, while those purchasing the puts are betting on the stock to retreat below this level in the near term. Delta on the front-month call -- which expires at this Friday's close -- is docked at 0.91, versus negative 0.17 for the front-month put. Meanwhile, delta on the back-month call, which expires at the close on Friday, Oct. 17, is 0.74, compared to negative 0.27 for the back-month put.

Longer term, shares of Vimicro International Corporation (ADR) (NASDAQ:VIMC) have risen 344% this year. Against this backdrop, option traders have bought to open 20.96 calls for every put over the past 50 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), and short interest accounts for less than 1% of the stock's available float.


Options Radar: KB Home, Melco Crown Entertainment, Yingli Green Energy

Reviewing notable options activity on KB Home, Melco Crown Entertainment Ltd (ADR), and Yingli Green Energy Hold. Co. Ltd. (ADR)

by 9/16/2014 2:06 PM
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Three stocks seeing notable options activity today are homebuilder KB Home (NYSE:KBH), gaming giant Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), and solar panel producer Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE). Here's a look at how today's options traders have been placing their bets on these three names.

  • KB Home (NYSE:KBH) is fractionally higher this afternoon at $16.86, yet options volume is exploding ahead of next Wednesday's early morning earnings report. Specifically, calls are crossing the tape at 10 times the usual intraday rate. Most active by far is the near-the-money October 17 call, where a multi-exchange sweep of 12,321 contracts traded just after 11 a.m. ET. It appears these calls are being sold to open, indicating an expectation for KBH shares to remain below $17 through the close on Friday, Oct. 17, when the back-month options expire. This theory is confirmed by Trade-Alert, which speculates the calls may be covered.

  • Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is swooning in sympathy with sector peer Las Vegas Sands Corp. (NYSE:LVS), off 3.6% to trade at $26.11. Earlier, in fact, MPEL shares hit a new annual low of $25.58. In the options pits, contracts are flying off the shelves at a rate four times the norm at this point in the day, and short-term contracts are in demand, per the stock's 30-day at-the-money implied volatility, which is up 3.7% to 36.3%. Despite MPEL's technical weakness -- year-to-date, the shares have lost one-third of their value -- traders today are betting on a rebound, buying to open the September 26 and January 2015 31-strike calls.

  • Yingli Green Energy Hold. Co. Ltd. (ADR) (NYSE:YGE) is 0.6% lower this afternoon to hover near $3.50, bringing its 2014 deficit back beyond 30%. Not surprisingly, put volume is running at a faster-than-usual rate, with nearly 10,000 contracts on the tape -- compared to an expected full-day volume of 3,540 contracts. Digging deeper, bearish traders are active in YGE's options pits. The most active strike is the deep in-the-money October 7 put, which speculators are buying to open to wager on additional downside in the solar name.


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