Stocks quoted in this article:
Three of today's most actively traded large-cap names among the options crowd are Intel Corporation (NASDAQ:INTC - 19.67), Microsoft Corporation (NASDAQ:MSFT - 26.60), and JPMorgan Chase & Co. (NYSE:JPM - 40.99). Here is a quick look at some interesting activity we are seeing in these option pits today.
Call volume is slightly outpacing put volume in INTC today, and the most active strike is the January 22.5-strike call, where almost 11,000 contracts have traded on open interest of 50,000. Nearly all of the trades have crossed the tape at the ask price, and implied volatility is on the rise, suggesting the calls may be opening on the buy side. Breakeven (at expiration) would be roughly $22.58 (strike plus average premium of $0.08 per contract), or a whopping 15% above current levels. This is an aggressive, albeit inexpensive, bet that INTC will power significantly higher over the next seven weeks. The stock has been making a series of annual lows of late and is poised to lose roughly 9% in November alone. Currently, INTC is scheduled to report earnings shortly before January options expiration.
Meanwhile, MSFT is seeing some notable action at its January 27-strike put. Nearly 9,300 contracts have traded, 96% of which are crossing at the ask price. This is already one of the most heavily traded puts in the January series, with almost 74,000 contracts in open interest, but data from the International Securities Exchange (ISE) suggests at least some of today's volume is the work of new buyers. With a volume-weighted average price of $0.87 per contract, breakeven on this put when the options expire is $26.13. The stock has not yet begun to recover from its Nov. 13 bear gap (spurred by a shake-up among the executive ranks). As such, bearish speculation has been increasing; short interest expanded by almost 11% during the last two weeks.
Finally, JPM is a target for short-term bulls, as the 12/7 42.50-strike call has attracted volume of 4,200 on open interest of just 74. Roughly 95% of the trades at this strike have gone off at the ask price, suggesting they are being purchased to open. These call buyers are betting JPM will rally north of $42.59 (strike plus average premium paid) by next Friday's close. Meanwhile, the February 39-strike put is active, with all of the 3,800 contracts changing hands trading off the bid price. These puts are likely being sold to open in the hopes that JPM will stay north of $39 through the next few months, causing the short puts to expire worthless (at which point the seller pockets the initial premium collected as profit).
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.