Stocks quoted in this article:
Three of today's most actively traded large-cap names among the options crowd are Facebook Inc (NASDAQ:FB - 26.10), Microsoft Corporation (NASDAQ:MSFT - 27.20), and Cisco Systems, Inc. (NASDAQ:CSCO - 18.98). Here is a quick peek at some interesting activity we are seeing in these option pits today.
With FB up 8% yesterday and slightly higher again today following a price-target hike, some overhead call sellers appear to be heading for the proverbial hills. On Nov. 21, according to Trade-Alert, roughly 11,000 contracts traded on the December 27 call, 84% of which crossed at the bid price. Open interest expanded the following session, suggesting this was sell-to-open activity. With the strike back in focus today and implied volatility dropping despite a majority of action trading at the ask price, it appears as though call sellers are exiting their positions at a loss. Having sold the positions for an average net credit of $0.30 per contract, they are buying these back today for $0.91 each. But this $0.61 actualized debit may beat the alternative of potentially unlimited losses, if the stock continues to rally. If these were covered call positions, shareholders may be rethinking their strategy and are now unwilling to sell out of the shares at the $27 price point.
In early afternoon action, MSFT has seen roughly 44,000 calls and 39,000 puts cross the tape. The most-active option is the January 25 put, which is already home to nearly 173,000 contracts in open interest. More than 17,000 contracts have traded at this out-of-the-money strike today, practically all of which are changing hands at the bid price. Given the implied volatility backdrop and data from the International Securities Exchange (ISE), this volume is likely a mix of traders selling to close existing long put positions and others selling to open out-of-the-money puts in hopes that the stock will stay above $25 through January expiration.
Finally, as CSCO goes ex-dividend today, call option volume is slightly more active than usual. Getting special attention is the December 20 call, which has seen almost 21,000 contracts trade on open interest of 18,000. The lion's share of this crossed the tape in one block of 20,000 contracts, which traded at the ask price of $0.06 per contract. If these are being bought to open, it suggests the belief that CSCO will rally above $20.06 (strike plus premium paid) by December expiration in just over three weeks.
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.