Options Check-Up: Cirrus Logic, Molycorp Inc, and Alcatel Lucent SA

Analyzing recent option activity on Cirrus Logic, Inc., Molycorp Inc, and Alcatel Lucent SA (ADR)

Oct 17, 2014 at 7:24 AM
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Among the stock attracting attention from options traders lately are integrated circuit specialist Cirrus Logic, Inc. (NASDAQ:CRUS), rare earths producer Molycorp Inc (NYSE:MCP), and telecommunications firm Alcatel Lucent SA (ADR) (NYSE:ALU). Below, we'll break down how options buyers are positioning themselves, and how much speculators are willing to pay for their bets on CRUS, MCP, and ALU.

  • Option traders have grown increasingly bullish on CRUS ahead of its turn in the earnings confessional the evening of Wednesday, Oct. 29. Specifically, the stock's 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has risen to 10.51 from its Oct. 1 reading of 0.73, and is now ranked in the 88th annual percentile. Simply stated, calls have been bought to open over puts with more rapidity just 12% of the time within the past year. With CRUS boasting a short interest-to-float ratio of 11.3%, though, a portion of this recent call buying -- particularly at out-of-the-money strikes -- could be at the hands of shorts hedging against a post-earnings bounce. Since hitting its most recent high of $24.74 on Sept. 2, the stock has surrendered 19% to trade at $20.03. Regardless of the reason, premium on Cirrus Logic, Inc.'s short-term options is relatively expensive at the moment, as evidenced by the stock's 30-day at-the-money (ATM) implied volatility (IV) of 56.3%, which ranks higher than 87% of similar readings taken in the past year.

  • Put players have been active on MCP of late. At the ISE, CBOE, and PHLX, for example, the equity's 10-day put/call volume ratio of 1.86 ranks just 7 percentage points from an annual bearish peak. This shouldn't be too surprising, though, considering the security has shed 73.3% year-to-date, and closed Thursday at $1.50. The cost to purchase Molycorp Inc's short-term options is on the high end -- which is good news for call sellers -- per the equity's 30-day ATM IV of 132.4%, which arrives above 98% of comparable readings taken in the past year. This could be due to the company's upcoming earnings report, tentatively slated for release between Wednesday, Nov. 5 and Monday, Nov. 10.

  • ALU also has its quarterly earnings report on the horizon, due out the morning of Thursday, Oct. 30. Option traders at the ISE, CBOE, and PHLX have been scooping up puts at an accelerated clip in the weeks leading up to the scheduled event. In fact, the stock's 10-day put/call volume ratio of 0.19 ranks in the 86th percentile of its annual range. Option traders have been willing to pay a bit more for their pre-earnings bets -- ALU's 30-day ATM IV of 59% is sitting higher than 87% of all other readings taken over the past 12 months. On the charts, Alcatel Lucent SA (ADR) (NYSE:ALU) tagged a fresh annual low of $2.28 yesterday, before settling the session at $2.36. Year-to-date, the shares are down 46.4%.

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