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Most Active Options Update: Research in Motion, Oracle, Ford Motor

RIMM, ORCL, and F are seeing notable options activity today

by 12/31/2012 12:22 PM
Stocks quoted in this article:

Of the 20 equities with the heaviest options volume in recent sessions, three names of notable interest this afternoon are Research in Motion Limited (USA) (NASDAQ:RIMM - 11.72), Oracle Corporation (NASDAQ:ORCL - 32.99), and Ford Motor Company (NYSE:F - 12.82). Here is a quick look at today's interesting option activity in these options pits.

Call players are taking a short-term approach to RIMM today by selling to open some overhead positions. More than 3,600 contracts have traded on the 1/4 13-strike call today, narrowly outpacing existing open interest. The large majority has traded off the bid price, and data from the International Securities Exchange (ISE) indicates some of the positions are trading to open. Through this strategy -- which may be a covered call -- investors are hoping to keep the premium collected (an average of $0.06) if RIMM closes below $13 on Friday, rendering the calls worthless. As this is a nearly 11% advance from current levels, the delta for this weekly option is just 15%. In other words, the options market is pricing in a 15% chance the option will be in the money by Friday's closing bell (or an 85% chance of a worthless expiration, which is good news for today's call sellers).

The most active strike in ORCL so far today is the June 35 call, where one block of 7,500 contracts traded off the ask price of $1.40 per contract. As such, the block was worth a combined total of $1.05 million as it crossed the tape. With implied volatility inching higher, it is likely this block is being purchased to open, on the belief that ORCL has upside potential through the next several months. While the option players can sell their position at any time during the contract's lifespan, breakeven at the time expiration rolls around in more than six months is $36.40, or the strike price plus the premium paid. This is roughly 10.3% above the stock's current price and would also represent a new annual high for the shares. In fact, ORCL has not traded north of the $36 mark since May 2011.

F is once again seeing some heavy trading, while the stock edges lower despite recent reports of increasing vehicle sales for 2012. Call volume on the automaker is running about twice as heavy as usual, while put volume is quadruple what's typically seen on an intraday basis. Nearly 26,000 contracts have traded on the February 13 call, making this the most active strike. A large block of 15,915 calls traded at the bid price of $0.58 per contract, but given existing open interest -- and thanks to data from the ISE -- it appears this position is being sold to close. These calls were active on Dec. 26, when a block of 40,000 contracts went off at the ask price of $0.44 -- according to Trade-Alert -- and was likely bought to open. Today's volume could be the work of the same trader, closing out some of this hefty position for a quick profit.

The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.

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