Stocks quoted in this article:
Among today's most actively traded names among options speculators are Citigroup Inc. (NYSE:C - 37.51), Intel Corporation (NASDAQ:INTC - 20.64), and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX - 31.86). Here is a quick look at some interesting trades we are seeing in these option pits today.
As C sits just over 3% shy of its Oct. 18 annual high of $38.72, call volume is taking center stage. In midday trading, more than 28,000 calls have traded, compared to 22,000 puts. A large portion of this volume has changed hands at the 12/14 38 call strike, where more than 7,000 contracts have crossed the tape, exceeding open interest. Implied volatility has ticked higher and more than two-thirds of the trades have gone off at the ask price, suggesting buy-to-open activity. Based on the volume-weighted average price (VWAP) of $0.23, C shares need to clear the $38.23 level by Friday's closing bell for these calls to be in profitable territory. Fresh from a successful test of support at its 80-day moving average, C is currently up 8.3% in December. Today's short-term call buyers are hoping this momentum continues through the end of the week.
Conversely, even with a 2.8% pop higher today, INTC isn't too far removed from an annual low of $19.23 tapped on Nov. 21. All eyes are on the December 21 call, where more than 27,000 contracts have traded. Open interest already stood at an impressive 62,000, so some of this activity could be on the closing side. Data from the International Securities Exchange (ISE) also shows some contracts are being sold to open, possibly as part of a covered call strategy. Speculators selling these calls hope INTC will stay south of $21 through Dec. 21 expiration, at which point the short puts expire worthless and the initial premium collected is kept as profit. Currently, the VWAP for this option today is $0.18.
Finally, option players are taking a long-term view of FCX, scooping up the January 2014 35 calls. Almost 3,400 contracts have traded -- the majority of which have crossed at the ask price -- and implied volatility is moving higher. Assuming these LEAPS are being purchased to open, breakeven at expiration is $38.09, or the strike price plus the average debit of $3.09. This is 19.6% above current levels, but the option has more than 13 months of time value left in it. What's more, the average 12-month price target among analysts is 33% above the current level, at $42.50. FCX bulls are hoping past is not prologue, however, as the stock has given back nearly 17% during the last 12 months.
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.