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Most Active Options Update: Research in Motion, Microsoft, and Ford

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

by 1/3/2013 1:09 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 - 11.74), Microsoft Corporation (NASDAQ:MSFT - 27.43), and Ford Motor Company (NYSE:F - 13.60). Here is a quick look at today's interesting option activity in these options pits.

Short-term RIMM speculators have executed bearish plays, choosing to dismiss the stock's recent relative strength. (Over the past two months, the stock has outperformed the S&P 500 Index [SPX] by 35 percentage points.) The 1/4 11.5-strike put is the most active RIMM option so far today, with almost 4,500 contracts trading, outpacing current open interest. Nearly 70% of this volume has traded at the ask price, and implied volatility has surged more than 9 percentage points, making it likely that these are being purchased to open. The very short-term bets (that expire at tomorrow's close) are effectively a wager that RIMM will drift lower over the next several trading hours. Breakeven at expiration, based on the volume-weighted average price (VWAP) of $0.25, is $11.25, or 4.2% below current levels.

Bears are also active in MSFT, which is seeing attention on the February 25 put. More than 5,800 contracts have traded, 94% of which crossed at the ask price. Data from the International Securities Exchange (ISE) suggests at least some of these out-of-the-money positions were purchased to open. Meanwhile, MSFT has also seen call selling activity at the October 32 call. In fact, one block of 5,000 contracts traded at the bid price of $0.54 per contract. This volume vastly exceeds open interest, suggesting it traded on the opening side. This may be the work of shareholders executing a covered-call strategy on the belief that MSFT has limited upside through the next 10 months. The strike is currently out of the money by 16.7% with a delta of 22%, suggesting a less than 1-in-4 chance of being in the money by October options expiration.

F has zoomed to another new annual high, but short-term speculators foresee a ceiling ahead. The 1/11 14-strike call is quite active today, with more than 36,000 contracts trading on open interest of 20,000. One block of 26,127 contracts crossed the tape in one fell swoop, but traded at the bid price of $0.06 per contract. These were likely sold to open on the belief that F will not surpass the 14 strike by next Friday's close, when these weekly options expire.

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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