Earnings Season Highlights

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A collection of noteworthy post-earnings reactions
Published on Dec 20, 2016 at 11:14 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Expectational Analysis
  • By the Numbers
Energy stocks have been on fire this month, after the Organization of the Petroleum Exporting Countries (OPEC) and several of its non-cartel counterparts agreed to curb crude production. Among the oil-and-gas stocks trading higher alongside crude are Apache Corporation (NYSE:APA) and Phillips 66 (NYSE:PSX), up a respective 1.5% and 4.9% month-to-date. And although shares of both energy firms are within striking distance of notching new highs, expectations are low for APA and PSX -- making the outperforming energy stocks ripe for extended rallies.

APA, took a quick bounce off its rising 40-day moving average in late November, which helped send the shares soaring to a fresh annual high of $69 on Dec. 12. After notching this notable milestone, APA pulled back to the $66 region -- a level that corresponds to its early October highs, and now appears to be emerging as a floor for the shares. At last check, the security was trading up 0.2% at $66.86, bringing its year-to-date lead north of 50%.

Nevertheless, short sellers have been actively betting against APA, with short interest surging 14.5% in the two most recent reporting periods. With 23.3 million shares sold short, it would take nearly seven sessions to cover these bearish bets, at the stock's average pace of trading. Plus, analysts have been slow to join in on APA's uptrend. Of the 21 brokerages covering the shares of Apache Corporation, 17 maintain a "hold" or "sell" rating. Should the stock continue its march higher, a round of short-covering and/or upgrades could translate into a fresh burst of buying power.

PSX, meanwhile, has tacked on roughly 17% since bottoming near $74 in July -- a region that has served as a floor for the stock since February 2015. And the shares topped out at a near-term high of $88.87 one week ago, just a chip-shot away from their March 22 annual high of $90.87. More recently, the security was down 0.4% today to trade at $86.86.

Options traders, however, have been buying to open puts over calls at a near-annual-high clip in recent weeks, per PSX's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 18.15 -- in the elevated 97th percentile of its 12-month range. Almost all of this action has transpired at the January 2017 70-strike put, as traders brace for -- or shareholders hedge against -- a breach of $70 over the next several weeks.

Elsewhere, short interest dropped nearly 10% in the most recent reporting period, but it would still take more than four sessions to covering the remaining shorted shares, at the stock's average pace of trading. Additionally, 11 out of 13 analysts maintain a lukewarm "hold" recommendation on Phillips 66. Continued short covering and/or a round of bullish brokerage notes could help push the shares of PSX into annual-high territory.

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Published on Dec 20, 2016 at 8:23 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Trader Content

Toymaker Mattel, Inc. (NASDAQ:MAT) finds itself in a precarious position. Not only has the stock underperformed the broader S&P 500 Index (SPX) in 2016, it's also sitting below several key technical levels. For example, the shares are perched just south of their 2007 peak, the $31 level (or three times their 2009 low), and $29.18 (or 50% above their 2015 low). In other words, MAT finds itself looking up at potentially triple-barreled technical resistance.

161216mat

 

If the shares fail to break out, they could be pressured lower as optimism begins to wane. This glass-half-full approach is clear among options traders, who have shown a pronounced preference for bullish bets over bearish. MAT's 10-day call/put volume ratio is a top-heavy 8.12 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- just 6 percentage points from an annual peak. Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.46 rests below 87% of comparable readings from the past year. Related to this, peak call open interest resides at the overhead January 2017 30 strike, which could reinforce round-number resistance.

Outside the options arena, analysts are largely bullish toward the shares. MAT has received eight "strong buy" ratings, compared to five "holds" and not a single "sell." In other words, the stock could be vulnerable to downgrades.

Lastly, MAT's short-term options are attractively priced from a volatility perspective, per its Schaeffer's Volatility Index (SVI) of 25% -- in the low 16th annual percentile. Not to mention, our recommended put option has a leverage ratio of negative 4.8, meaning it will double in value on a 17.2% decline in the underlying stock.

Subscribers to Schaeffer's Weekend Series service received this MAT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Series is one of our most popular trading services.
Published on Dec 20, 2016 at 9:13 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades
Analysts are weighing in on semiconductor stocks Advanced Micro Devices, Inc. (NASDAQ:AMD) and NVIDIA Corporation (NASDAQ:NVDA), as well as biotech issue Conatus Pharmaceuticals Inc (NASDAQ:CNAT). Here's a quick roundup of today's bullish brokerage notes on AMD, NVDA, and CNAT.

  • AMD is up 2.3% ahead of the bell, and on pace to make another run at nine-year highs, after Mizuho raised its rating on the stock to "buy" from "neutral," saying, "AMD is a name we missed," and citing growth in the artificial intelligence (AI) industry. It's been an incredible year so far for Advances Micro Devices, Inc., which has tacked on a cool 281.5% in 2016, at $10.95. However, near-term options traders have taken an unusually put-heavy approach to the stock. Specifically, AMD's Schaeffer's put/call open interest ratio (SOIR) of 0.94 sits in the high 82nd percentile of its annual range.

  • Mizuho also weighed in on NVDA, raising its price target to $115 from $80. What's more, Goldman Sachs added NVIDIA Corporation to its "Conviction Buy" list, and increased its price target on the stock to $129 from $92 -- uncharted territory. The shares are up 3.1% in pre-market trading as a result, and set to open at a new record high. The stock has been shooting sharply higher, more than tripling in value over the last 12 months, at $101.63. But that doesn't mean the equity's rally is out of fuel. In fact, nearly 14% of NVDA's available float is wrapped up in short interest, representing more than a week's worth trading, based on average daily volumes. That's plenty of buying power waiting on the sidelines to drive the shares to higher highs.

  • CNAT announced last night it has entered into a licensing agreement with Novartis AG (ADR) (NYSE:NVS) to develop a fatty liver disease treatment, sending the shares soaring more than 150% in electronic trading. After closing Monday at $1.96 -- off 32% year-to-date -- Conatus Pharmaceuticals Inc is on track to open at a level not seen since September 2015, blowing past resistance at the 40-week moving average. The news also inspired no fewer than four brokerage firms to raise their price targets on CNAT, including H.C. Wainwright, which doubled its target to $18 -- a roughly 15% premium over the stock's January 2014 record high, and 818% above last night's finish. Likewise, in addition to raising its target price to $10 from $6, JMP Securities explained, "If successful, we see a multibillion-dollar product with significant upside for investors." Analysts were already in the security's bullish corner prior to the licensing deal, with all six firms following CNAT maintaining a rating equivalent to a "strong buy."
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Published on Dec 19, 2016 at 8:31 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Monday Morning Outlook
Since the early November U.S. election, stock market momentum -- at the expense of the bond market -- has been the big story, with questions raised in the media about equities rising "too far, too fast." Moreover, in this space during the past couple of weeks, potential hesitation points have been pointed out -- such as Dow Jones Industrial Average (DJIA - 19,843.41) 19,000, which was sliced through like a knife through butter; and the S&P 500 Index (SPX - 2,258.07) 2,200 century mark, which is now 58 points below the index's Friday close.




Per the observations I made on Twitter during the past couple weeks, other round-number areas seem to have finally slowed the momentum, with the iShares Russell 2000 ETF (IWM - 135.91), which had shown leadership from the early November low, declining slightly last week. Moreover, equity benchmarks we did not discuss in recent weeks -- specifically, the S&P MidCap 400 Index (MID - 1,667.73) and NYSE Composite Index (NYA - 11,125.22) -- stalled at round-number year-to-date percentage gain levels of 20% and 10%, respectively.

In fact, MID's month-to-date high so far is at 1,698 -- just a couple points shy of the round 1,700 level. Like IWM, this index has also displayed leadership since the election.

MID daily 1216

"We move into this week's standard December options expiration week with the SPDR S&P 500 ETF Trust (SPY - 226.51) trading slightly above the $225 area... The $225 level coincides with S&P 500 Index (SPX - 2,259.53) 2,250, a half-century mark -- and such half-century marks have historically acted as magnets during trading range behavior and/or key pivot areas after a big advance or pullback... The importance of these half-century levels could be due to the heavy open interest that tends to build up on SPX and SPY options at these strike prices that represent half-century levels on the SPX. Coincidentally, the $225 level on the SPY is also around its 2016 10% YTD return level."
    -- Monday Morning Outlook, December 12, 2016

Last week, in addition to the Federal Open Market Committee (FOMC) interest rate decision, was also the expiration of standard December options. Indeed, the SPDR S&P 500 ETF Trust (SPY - 225.04) did hesitate around the significant 225 strike level, which coincides with the SPX 2,250 mark. This was not a major surprise, as the 225 strike was home to the last significant call open interest in the December series, some 5 points below the next heavy call strike at 230.

spy oi config 12-16

And as we said last week, throw in the fact that this area resides around the round 10% year-to-date return, and SPY's hesitation here makes sense. With a sell-off occurring in the immediate aftermath of the Fed meeting, the big call open interest at the 230 strike was never seriously challenged -- even though the potential for this was alive, with the Fed acting as a potential catalyst.

spy 30-minute 1216

Fortunately for bulls, stocks in recent days have only stalled at these round-number resistance levels, versus actually selling off. So, on the charts, the technical backdrop appears sound, punctuated by the recent all-time highs. Internally, breadth is suspect, as the number of advancers has declined, even with the SPX recently hitting highs.
 

spx breadth 1216

Moreover, we are seeing optimism come into the market, which usually occurs prior to a sell-off or trading range behavior. For example, newsletter advisor optimism, per a survey by Investors Intelligence (II), is at the highest level since July 2014, with the difference between the percentage of bullish advisors (59%) and bearish advisors (19%) at 40 percentage points. This differential is an extreme reading, per the chart below, and since 2011, sentiment extremes of this magnitude have typically preceded either trading range or corrective price action.

In fact, the bulls-minus-bears differential in the weekly Investors Intelligence poll ranks in the 93rd percentile of all other such readings dating back to 1972. Looking back over this time frame, we have quantified the historical price action of the SPX based on the percentile rank of the II bulls-minus-bears reading. The data suggests that the optimism isn't necessarily an alarm bell for bulls to exit, but it does suggest that the expected returns over the next days and weeks are flat, and far below the "normal" returns for various time frames (see the table below the chart).

investors intelligence since 1972 1216

If you are a short-term trader, be open to trades on both the short and long side of the market. If you are a long-term investor, do not disturb your bullish positions.


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Published on Dec 12, 2016 at 12:27 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stock Market News

Tesla Motors Inc (NASDAQ:TSLA) is making headlines, and could remain in focus over the next few weeks. The electric automaker reached a settlement in its lawsuit in Norway, which alleged TSLA had overstated the horsepower of its Model S P85D. Furthermore, Tesla CEO Elon Musk will reportedly be present for Donald Trump's roundtable with tech CEOs on Wednesday, which will include guests such as Larry Page, Sheryl Sandberg, Satya Nadella, and Tim Cook, among others. TSLA is also ramping up ahead of its gigafactory tour, scheduled for Jan. 4. As TSLA gears up for a busy few weeks, option bears and short sellers have been more active than usual.

In TSLA's option pits, put open interest ranks in the 98th percentile of its annual range, after hitting an annual peak on Friday. TSLA's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at 1.20, higher than 92% of all other readings from the past 12 months, indicating a healthier-than-usual appetite for bearish bets during the last two weeks. What's more, TSLA's Schaeffer's put/call open interest ratio (SOIR) of 1.74 sits just 4 percentage points from an annual peak, indicating a stronger-than-usual put-bias among near-term option players.

Option traders aren't the only ones with reservations about TSLA's future performance. Short sellers are also piling on, with TSLA's short interest up 23.9% over the last two reporting periods. Shorted shares now account for 29.7% of TSLA's float -- an amount that would take more than eight days of trading to cover, at TSLA's average daily volume. Analysts also seem cynical towards TSLA, with 14 of 17 rating the shares a "hold" or worse. Recently, Deutsche Bank resumed overage of TSLA with a "hold," and cut its price target to $215 from $290.

So far today, though, TSLA is in the black, with the shares up 0.4% at $193.01. However, the stock has lost more than 19% this year, and has been ushered lower by its 50-day moving average since August.  Pullbacks could find a floor in the $180-$190 neighborhood, which has provided support on several occasions over the past couple of years.

Now looks like an opportune time to buy Tesla Motors Inc (NASDAQ:TSLA) options. The most "vanilla" option buyers stand to lose is the initial premium paid, and TSLA's short-term premiums are currently on the more modest side. TSLA's Schaeffer's Volatility Index (SVI) of 35% sits in just the 8th percentile of its annual range, indicating option players are pricing in relatively muted volatility expectations over the near term.

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Published on Dec 12, 2016 at 1:28 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move

U.S. stocks are mixed, as crude oil prices rally on an expanded output cap agreement. Among specific equities in focus today are biotech Akorn, Inc. (NASDAQ:AKRX), blue-chip oil stock Chevron Corporation (NYSE:CVX), and tech stock Performant Financial Corp (NASDAQ:PFMT). Here's a quick look at what's moving AKRX, CVX, and PFMT.

  • AKRX is up 8.3% at $20.15, after the drugmaker announced its Decatur facility passed re-inspection by the U.S. Food and Drug Administration (FDA). This is a much-needed boost for the shares, which are still down by over 45% in 2016, and just last week were within striking distance of new two-year lows. Short sellers have been jumping ship as of late, with AKRX's short interest down 18.3% over the last two reporting periods. Nevertheless, there's likely plenty of short sellers sweating today's price action, given shorted shares still account for 12.2% of Akorn, Inc's float, which would take nearly nine days of trading to cover, at AKRX's average daily volume.

  • CVX is up 1.9% at $118, as the stock follows the oil rally higher, notching a two-year high of $18.99 earlier today. CVX has been on a steady trek higher since late October, and has added roughly 15% in three months. Nevertheless, near-term option players have been especially put-skewed as of late, with Chevron Corporation's Schaeffer's put/call open interest ratio (SOIR) of 1.42 sitting in the 80th percentile of its annual range.
  • PFMT is trading 38.1% lower at $2.39, after announcing it had not been chosen as one of the Department of Education's seven contractors for unrestricted recovery. PFMT -- which was halted earlier -- is currently on the short-sale restricted (SSR) list, and is among the worst performers on the Nasdaq. What's more, Compass Point downgraded PFMT to "neutral" from "buy," and sliced its price target to $3 from $4.50. Prior to today, the shares had been on a steady path of higher highs since July, and had more than doubled year-to-date.  Plus, option buyers were getting quite the bargain, with premiums near an annual low before today's nosedive. Performant Financial Corp's Schaeffer's Volatility Index (SVI) of 108% sat lower than 96% of all other readings from the past year, indicating near-term option players were pricing in historically low volatility expectations.
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Published on Dec 12, 2016 at 1:37 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Most Active Options Update
The 20 stocks listed in the table below have attracted the highest options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Among the stocks attracting notable attention are oil-and-gas name Chesapeake Energy Corporation (NYSE:CHK) and mining issue Freeport-McMoRan Inc (NYSE:FCX) -- two of the best-performing S&P 500 Index (SPX) stocks since the election. Here's a quick look at how options traders are lining up on CHK and FCX. 

Most Active Options Dec 12

CHK call options have been extremely popular in recent weeks amid the stock's strong showing on the charts. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 4.66, which tops 88% of the past year's readings. In short, call buying has been much more popular than normal.

At the same time, call traders have been employing another strategy, as well. During the past two weeks, the front-month December 8 call -- which expires at the close this Friday -- has seen the largest increase in open interest among all options yet to expire. However, based on data from the major exchanges, the vast majority of positions here were sold to open, meaning short-term traders are betting on CHK stock holding below the closely watched $8 mark. Sure enough, this is the most popular option again in today's trade, with the ISE confirming at least some sell-to-open action. 

Unfortunately for these traders, it seems to be a much better time to buy premium than sell it. This is according to the stock's Schaeffer's Volatility Index (SVI) of 61%, which is just 1 percentage point from an annual low -- meaning low volatility expectations are being priced into CHK options. While the shares have gained significantly since their most recent bottom near $5 in early November, they were last seen 1.7% lower at $7.59. Earlier, however, the stock touched an annual high of $8.20 amid broader energy tailwinds.

Like CHK, FCX call options have been extremely popular in the past two weeks, with data from the ISE, CBOE, and PHLX showing a 10-day call/put volume ratio of 2.63 -- ranking in the 94th annual percentile. Taking a closer look at the largest increases in open interest during this time frame, the February 19 call takes the top spot by a wide margin, with roughly 23,500 positions added. As for the front-month series, FCX's December 15 put leads the way, with almost 6,800 new positions. Data from the major exchanges suggests there's been a steady mix of buy- and sell-to-open activity at each. 

It's not surprising to see the $15 level in focus, since the shares have been consolidating atop this mark in recent weeks. Going back further, FCX stock has picked up 67% since hitting $9.24 on Oct. 13, but the stock is down 2% today at $15.43. 

Regardless, Freeport-McMoRan Inc's (NYSE:FCX) SVI of 52% ranks in the low 11th annual percentile, so it seems to be a promising time to buy premium, at least on short-term options. What's more, FCX and Chesapeake Energy Corporation (NYSE:CHK) both have very elevated Schaeffer's Volatility Scorecards (SVS), with respective readings of 96 and 87. So, not only could it be an opportune time to buy short-term options for both stocks, but each underlying has tended to make bigger-than-expected moves on the charts during the past year, relative to what the options market has priced in. 

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Published on Dec 12, 2016 at 1:52 PM
Updated on Mar 19, 2021 at 7:15 AM
  • By the Numbers
It's quadruple witching expiration week, with stock and index futures and options simultaneously expiring at Friday's close. While December options expiration week tends to favor the bulls, the risk-reward during quadruple witching expiration weeks is less favorable. And although a number of stocks have historically come out on top, Schaeffer's Senior Quantitative Analyst Rocky White also uncovered a list of names that tend to lag during quadruple witching expiration week. Making the list among stocks that have options, trade at least one million shares per day, and are valued at at least $10 per share are burrito chain Chipotle Mexican Grill, Inc. (NYSE:CMG), online travel agent Ctrip.Com International Ltd (ADR) (NASDAQ:CTRP), and gold stock Goldcorp Inc. (USA) (NYSE:GG).

worst quadruple witching expiration stocks

CMG is up 2.2% at $378.20, after the company said Steve Ells would resume his role as sole CEO -- a position he's shared with Monty Moran since 2009 -- effective immediately. Moran will retire from Chipotle next year, and serve in an advisory role until then. Nevertheless, CMG stock remains down 21.2% year-to-date, and hit a three-year low of $352.96 on Nov. 1. The shares could be due for some historical headwinds, too. Since 2010, CMG stock has been positive just 41% of quadruple witching weeks, averaging a loss of 0.3%.

Should the shares resume their longer-term slide, downgrades could create an even bigger headache for Chipotle Mexican Grill, Inc. Currently, eight of 25 brokerage firms continue to maintain a "buy" or better rating on the embattled stock, leaving the door wide open for a round of bearish brokerage notes -- which could pressure the shares even lower.

True to form, CTRP is trading down 2.4% at $42.40, falling amid a broader decline in Chinese stocks. Quadruple witching expiration week has historically been rough for shares of CTRP, and although the stock has averaged a 0.4% gain since 2010, it's been positive just one-third of the time. More broadly, the security has shed roughly 13% over the past 12 months.

Options traders, meanwhile, have been bracing for more downside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), CTRP's 10-day put/call volume ratio of 1.53 ranks in the 88th annual percentile -- indicating puts have been bought to open over calls at a faster-than-usual clip. This bearish bias is seen elsewhere, too, with a healthy 8.4% of Ctrip.Com International Ltd's float sold short.

Over the past six years, GG has turned in a positive quadruple-witching-week performance 30% of the time, averaging a loss of 1.6%. While the gold stock was last seen up 0.2% at $13.22 ahead of Wednesday's Fed announcement, it's still lost more than 35% since hitting an annual high at $20.38 in early July. Plus, the shares are now staring up at the $13.60 region -- home to a 38.2% Fibonacci retracement of GG's July highs and January lows.

Short-term options traders are more call-biased than usual toward Goldcorp Inc. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.46 indicates calls more than double puts among options set to expire in three months or less. What's more, this ratio ranks below 77% of all comparable readings taken over the past year. Drilling down, peak open interest for GG is found at the January 2017 15-strike call, with 30,966 contracts currently outstanding.

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Published on Dec 12, 2016 at 2:29 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Stock Market News
  • Intraday Option Activity
Defense stocks are taking it on the chin, after President-elect Donald Trump lashed out against of the biggest players in the aerospace sector. Northrop Grumman Corporation (NYSE:NOC) and Raytheon Company (NYSE:RTN) are both notably lower amid heavy stock volume, while their options pits have gone into overdrive.

While NOC is typically one of the best stocks during quadruple witching week, it's gotten off to a rough start. The shares have fallen 3.5% to trade at $230.19 -- with intraday volume in the 99th annual percentile -- and could close below their 50-day moving average for the first time since early October. In fact, since touching a record $253.80 in late November, NOC stock has plummeted over 9%.

Understandably, put players have picked up the pace in recent weeks. NOC's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is 1.92 -- just 11 percentage points from an annual high. Likewise, the stock's Schaeffer's put/call open interest ratio (SOIR) is 3.71 -- with short-term puts nearly quadrupling calls -- ranking in the high 98th percentile of its annual range.

Today, overall options volume is running at more than twice the usual intraday clip. The December series is in focus, accounting for six of the 10 most active strikes, with likely buy-to-open activity at the 225 and 230 calls.

Interestingly, while bearish betting toward Northrop Grumman Corporation has accelerated in the options pits, it's fallen off among short sellers. The stock saw one of the largest decreases in short interest during the most recent reporting period, diving 29%. In fact, a slim 1.4% of NOC's float is currently dedicated to these bearish bets.

Defense stock RTN is also tanking with its sector peers, down 2.6% at $142.55. At its intraday low, the shares had even closed their early November, post-election bull gap. Yet, the stock is still more than 14% higher on a year-to-date basis.

According to Trade-Alert, bearish betting is prevailing this afternoon, with puts outstripping calls and changing hands at twice the normal intraday pace. This echoes what's been seen recently at the ISE, CBOE, and PHLX, where RTN has racked up a 50-day put/call volume ratio of 1.12 -- outstripping 88% of readings from the prior year. As a result, the stock's SOIR has grown to 1.70, just 6 percentage points from a 12-month peak.

While options traders have displayed severe skepticism toward Raytheon Company, analysts have been all in, for the most part. Of the 11 brokerage firms with coverage on the stock, 10 have doled out  a "strong buy," compared to one "hold" and not a single "sell" opinion.

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Published on Dec 12, 2016 at 2:37 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Stocks On the Move
  • Intraday Option Activity
  • Stock Market News
Shares of Exxon Mobil Corporation (NYSE:XOM) are soaring -- trading near levels not seen since July -- as oil prices rally on an output agreement among global crude producers. Additionally, rumors are swirling that President-elect Donald Trump is expected to nominate XOM CEO Rex Tillerson as his secretary of state. Against this backdrop, XOM stock is up 2.5% to trade at $91.24 -- and options volume is running at two times the average intraday rate, with more than 86,000 contracts on the tape.

Diving deeper, around 59,000 calls have traded on XOM so far, compared to roughly 27,000 puts. The January 2017 90-strike put has seen the most action -- with 7,405 contracts traded -- followed by the January 2017 92.50-strike call, which has seen 6,415 contracts cross the tape. There appears to be some buy-to-open activity occurring at each back-month strike, too. If this is the case, the put buyers expect XOM stock to retreat back below $90 by expiration at the close on Friday, Jan. 20, while call buyers are betting that the energy stock will break out above $92.50 over the next six weeks. Risk to either set of options buyers is limited to the initial premium paid.

More broadly speaking, options traders have been buying to open calls relative to puts at a faster-than-usual clip in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, the security's 50-day call/put volume ratio of 0.88 ranks in the elevated 82nd annual percentile.

Echoing this call-skewed backdrop is XOM's Schaeffer's put/call volume ratio (SOIR) of 0.87. Not only does this indicate that calls outweigh puts among options expiring in three months or less, but it ranks lower than 78% of all similar readings taken in the past 12 months. Simply stated, short-term speculators are more call-heavy than usual toward the energy stock.

Now appears to be a prime time to purchase premium on XOM's near-term options, too. While the security's Schaeffer's Volatility Index (SVI) of 16% ranks in the 11th annual percentile, its 30-day at-the-money implied volatility of 15.8% is docked in the 18th percentile of its 12-month range. Summing it all up, the options market is pricing lower-than-usual volatility expectations on XOM's short-term options.

On the charts, XOM pulled back sharply after hitting an annual high of $95.55 on July 15. However, the stock formed a double bottom in the $82.50-$83.50 neighborhood in late September and late October/early November, which was home to XOM's 320-day moving average and a 50% Fibonacci retracement of its July highs and January lows. What's more, today's pop has the shares of Exxon Mobil Corporation (NYSE:XOM) trading comfortably north of previous resistance in the $88.50-$89.00 neighborhood, and above peak front-month call open interest at the December 90 strike.

xom daily since december 2015

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Published on Dec 12, 2016 at 3:13 PM
Updated on Mar 19, 2021 at 7:15 AM
  • Intraday Option Activity
  • Expectational Analysis

Oil stock Transocean LTD (NYSE:RIG) is higher yet again today, boosted by crude oil prices. The shares were last seen up 0.4% at $15.48 after notching a fresh annual high of $16.66 earlier in the session. RIG continues to be one of the top post-election performers on the S&P 500 Index (SPX), so far extending its gains since Election Day -- just over one month ago -- to more than 57%. Despite an outstanding run up the charts, RIG remains surrounded by a surprising amount of pessimism.

Beginning with the brokerage bunch, 18 analysts currently rate RIG a "hold" or a "strong sell," compared to just three "strong buy" recommendations. Plus, the average 12-month price target of $9.85 is seated in line with the stock's Nov. 8 close, and thus at a huge discount to current levels. That means RIG may be overdue for a round of upgrades and/or price-target hikes, which could boost the shares.

Short sellers have continued to pile onto the stock in recent weeks, despite the shares' continued climb, setting up a potential short-squeeze situation. During the two most recent reporting periods, these bearish bets grew by 5.5%, and now represent about 27% of RIG's available float. At the equity's average pace of trading, it would take at least six sessions to cover all the shorted shares -- plenty of buying power to give RIG a lift.

Turning to the options pits, bearish bets continue to be the norm, as well. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.10 sits higher than 70% of the past year's readings. At the same time, it's possible put buyers could be Transocean shareholders protecting paper profits.

No matter the case, this preference for puts is echoed among short-term traders, as well. In fact, RIG's Schaeffer's put/call open interest ratio (SOIR) of 1.82 rests in the high 91st percentile of its annual range. What's more, the stock's front-month, gamma-weighted SOIR sits at 2.48 -- indicating put open interest more than doubles call open interest among near-the-money options in the December series, which expires at the close this Friday.

Today RIG puts are changing hands at nearly double the expected intraday rate, with over 33,000 on the tape so far. It appears some bearish speculators may be buying to open the December 14 and 14.50 puts. Buyers of these puts are betting RIG shares will drop back below the respective strike prices before the end of the week. Meanwhile, the largest single trade involved a block of 10,000 January 2018 10-strike puts, which may have been bought to open as long-term protection, as Trade-Alert indicates the block is tied to 160,000 shares of RIG stock.

On either side of the tape, short-term options buyers could be getting a great deal on RIG. The security's 30-day at-the-money implied volatility of 50.2% and its Schaeffer's Volatility Index (SVI) of 48% are seated in the low 4th and 6th percentiles of their respective 12-month ranges. Simply stated, the stock's near-term options are pricing in historically low volatility expectations at the moment.

As alluded to, since Election Day, RIG stock has accomplished some impressive technical feats. After a bounce off the familiar $11 level, the shares flew into positive year-to-date territory for the first time since July -- and now sit on a 25% lead for 2016. What's more, Transocean LTD (NYSE:RIG) is on pace for a sixth consecutive daily win.

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Published on Dec 12, 2016 at 9:21 AM
Updated on Mar 19, 2021 at 7:15 AM
  • Analyst Upgrades
Analysts are weighing in on oil-and-gas stock Whiting Petroleum Corp (NYSE:WLL), biotech Regeneron Pharmaceuticals Inc (NASDAQ:REGN), and chipmaker Advanced Micro Devices, Inc. (NASDAQ:AMD). Here's a quick roundup of today's bullish brokerage notes on WLL, REGN, and AMD.

  • WLL is set to pop 8% at the open, as crude oil prices explore annual-high territory. Also boosting shares of Whiting Petroleum Corp is a price-target hike to $13 from $9 at Wunderlich. The stock is up roughly 29% year-to-date based on last week's settlement at $12.14, and has recently found a solid foothold above the $12 mark. Options traders seem to be eyeing more gains, too. WLL's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at a top-heavy 5.54 -- higher than 91% of all readings from the past 12 months, suggesting calls have been bought to open over puts at an accelerated clip in recent months.

  • REGN is up 4.1% ahead of the bell, following an upgrade to "neutral" from "sell" at Chardan Capital, which also raised its price target on the stock to $350 from $300. Also creating a boon for REGN is news competitor Ophthotech Corp's (NASDAQ:OPHT) combination treatment for age-related macular degeneration failed to meet its primary endpoint in a late-stage trial. According to an analyst from RBC, the results mean that Regeneron Pharmaceuticals Inc's drug, Eylea, should remain the standard treatment for the disease. It's been a rough year for REGN, though, off 31% to close Friday at $372.83 -- so, it's little surprise analysts have largely been skeptical. In fact, of the 17 brokerage firms tracking the shares, 11 rate them a "hold" or worse. 

  • AMD could make another run at nine-year highs today -- up 1.8% in electronic trading -- after BMO raised its rating on the stock to "outperform" from "market perform" and more than doubled its price target, to $15 from $6. At $10.34, shares of Advances Micro Devices, Inc. have tacked on an incredible 260% in 2016 -- and tagged $10.66 last Thursday, their highest mark since November 2007. And while analysts are slowly beginning to raise their opinions, nearly 12% of AMD's available float remains tied up in short interest. This could create a short-covering situation, which may give the outperforming stock an additional boost. 
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