Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Are LinkedIn Bulls Buying Portfolio Insurance?

LNKD put volume soared to nearly twice the norm

by 1/16/2013 10:44 AM
Stocks quoted in this article:

Option traders waxed pessimistic on Linkedin Corporation (NYSE:LNKD - 118.00) on Tuesday, as evidenced by the healthier-than-usual appetite for puts. By the closing bell, the professional networking concern had seen close to 7,200 puts cross the tape -- almost double the norm. For comparison, fewer than 4,400 LNKD calls changed hands.

Most active was the January 2013 115-strike put, which saw 2,800 contracts exchanged at a volume-weighted average price (VWAP) of $0.66. Open interest rose overnight, and most of the puts traded at the ask price, hinting at buy-to-open activity.

By purchasing the puts to open, the buyers are expecting LNKD to breach the $114.34 level (strike minus VWAP) by the closing bell on Friday, when front-month options expire. However, even if LNKD remains north of the strike, the most the buyers can lose is the initial premium paid for the puts.

Currently, LNKD's soon-to-expire options look like a bargain, relatively speaking. The stock's Schaeffer's Volatility Index (SVI) of 41% stands just 17 percentage points from an annual low, suggesting front-month premiums are comparatively cheap right now. This, juxtaposed with LNKD's longer-term uptrend, could suggest that LNKD shareholders were buying the puts as short-term options "insurance" to guard against a potential pullback.

Whatever the motive, near-term options traders clearly prefer puts over calls. The stock's Schaeffer's put/call open interest ratio (SOIR) of 1.08 stands higher than 74% of all other readings of the past year, suggesting short-term speculators are more put-skewed than usual right now.

At last check, LNKD is trading fractionally higher at $118. Since dipping below $95 in mid-November, the shares have added about 25%. Should the security extend its upward momentum, and unwinding of pessimism in the options pits could add contrarian fuel to the fire.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.