Options Check-Up: Alcoa Inc, The Home Depot, Inc., and Nike Inc

Analyzing recent option activity on AA, HD, and NKE

Digital Content Group
Nov 6, 2014 at 7:35 AM
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Among the stocks attracting attention from options traders lately are aluminum giant Alcoa Inc (NYSE:AA), home improvement retailer The Home Depot, Inc. (NYSE:HD), and athletic apparel retailer Nike Inc (NYSE:NKE). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on AA, HD, and NKE.

  • AA was off 1.6% on Wednesday, finishing at $16.26. Year-to-date, the equity has added 53%. However, in the last four months, Alcoa Inc has seen resistance around the $17 mark, and options traders have been showing pessimism toward the equity in even more recent weeks. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), AA's 10-day put/call volume ratio of 1.30 sits just 7 percentage points from an annual bearish peak. Right now, options traders can place their bets at a relative discount, from a volatility perspective, with the stock's Schaeffer's Volatility Index (SVI) of 33% ranking in the 39th percentile of its annual range.

  • Options traders have also been placing bearish bets on HD at a faster-than-usual pace. The stock's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.43 sits only 1 percentage point from an annual bearish extreme. Additionally, The Home Depot Inc. has a Schaeffer's put/call open interest ratio (SOIR) of 1.54, in the 76th percentile of its annual range, displaying traders' preference for short-term puts over calls. HD's near-term options are currently on the expensive side, as its SVI comes in at 23%, in the 80th percentile of its annual range. Taking a step back, HD has added 16.3% in 2014, and closed 0.2% lower on Wednesday at $95.78.

  • Finally, NKE continued its push higher on Wednesday, hitting a record high of $94.84, before ending 0.8% higher at $94.68. It's more of the same for the equity, which has added 23.3% year-over-year, and 18.7% since its Sep. 26 earnings report. In the options pits, traders are expecting Nike Inc to continue its uptrend. The stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 4.91 lands in the 86th percentile of all similar readings taken in the past 12 months. What's more, NKE's options are currently inexpensive, on a volatility basis, according to its SVI of 16% -- which ranks in the 11th percentile of its annual range. The stock could also see a boost from a potential round of price-target hikes, considering its current perch rests atop its consensus 12-month price target of $94.67.

 

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