Stocks quoted in this article:
Three of today's most actively traded large-cap names among options players are Facebook Inc (NASDAQ:FB - 24.24), Cisco Systems, Inc. (NASDAQ:CSCO - 18.55), and Google Inc (NASDAQ:GOOG - 663.116). Here is a quick peek at some interesting activity we are seeing in these option pits today.
With a 5% gain today, FB has brought its month-to-date increase to roughly 15%. In fact, the stock has outperformed the S&P 500 Index (SPX) by nearly 24 percentage points during the last 20 trading days. Meanwhile, option traders are hoping for a quick reversal of this trend during the next couple of days. The weekly 23.5-strike put has seen more than 41,000 contracts trade on open interest of just 11,000. More than two-thirds of the trades have been at the ask price, and implied volatility has shot 9.4 percentage points higher. It is therefore likely at least some of this volume is the work of traders expecting a short-term drop in FB shares. Breakeven at Friday's close would be $23.38 (strike less the premium paid). Meanwhile, on the bullish side, more than 18,000 weekly 24-strike calls have changed hands, 65% of which traded off the ask price, suggesting buyers.
Ahead of its ex-dividend date of Nov. 27 (next Tuesday), CSCO is attracting some put buyers. The February 17-strike put is in focus, with 16,000 contracts trading on similar open interest. The majority of the volume is trading at the ask price, but some of this could be buy-to-close activity, as traders exit short out-of-the-money puts. Those buying the puts to open, on the other hand, are targeting a drop in the shares down to $16.54 (strike less premium paid) by mid-February. CSCO puts have been slowly gaining in popularity; the 10-day put/call volume ratio of buy-to-open orders stands at 0.51, up from the 20-day ratio of 0.45. The current short-term ratio is higher than 71% of the past year's data, suggesting demand for puts has accelerated in recent weeks.
GOOG is moderately lower today, and option traders have honed in on the weekly 660-strike put, where 7,000 contracts have traded on open interest of 1,600. With the majority of the contracts going off at or near the bid price, it appears traders are selling these out-of-the-money positions to open, in the hopes that GOOG will stay north of the 660 strike through Friday's close, allowing them to keep the premium collected as profit. So far today, the average premium for this put was $1.35.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past two weeks. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.