Options Check-Up: Ford Motor Company, Lululemon Athletica, NQ Mobile

Analyzing recent option activity on F, LULU, and NQ

by Karee Venema

Published on Nov 12, 2014 at 7:40 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are carmaker Ford Motor Company (NYSE:F), yoga apparel issue Lululemon Athletica inc. (NASDAQ:LULU), and Internet security specialist NQ Mobile Inc (ADR) (NYSE:NQ). Below, we'll break down how option buyers are positioning themselves, and how much they're willing to pay for their bets on F, LULU, and NQ.

  • F rallied 2.6% yesterday to close at $14.37, following reports the Detroit darling started production on its new aluminum-sided F-150 trucks -- which are slated to hit U.S. markets in December. Tuesday's positive price action marks a change of pace for Ford Motor Company, which has plunged almost 20% since hitting its most recent high of $17.87 on Sept. 3. Option traders have kept the faith, as evidenced by the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 20.90, which ranks at an annual bullish peak. Now appears to be an opportune time to bet on F's near-term trajectory, too, considering its Schaeffer's Volatility Index (SVI) of 20% ranks lower than 72% of similar readings taken in the past year. In other words, premium on the security's front-month options is relatively inexpensive at the moment.

  • LULU has spent the past year being pressured lower by its 200-day moving average, and a quick rejection from this trendline on Monday sent the shares 0.3% lower yesterday to settle at $43.18. Unlike the brokerage bunch, option traders have shown a bullish bias toward the long-term laggard, per the equity's 50-day ISE/CBOE/PHLX call/put volume ratio of 1.89, which ranks higher than 66% of comparable readings taken in the last 12-months. With 21.9% of the security's float sold short, though, a portion of this call buying -- particularly at out-of-the-money strikes -- may be a result of shorts hedging against any unexpected upside. Regardless, those purchasing Lululemon Athletica inc.'s short-term options should be encouraged by the stock's Schaeffer's Volatility Scorecard (SVS), which is docked at 79. Simply stated, LULU tends to make outsized moves, relative to what the options market has priced in.

  • NQ tacked on 1.2% yesterday to close at $7.58, after announcing a freshly inked deal with Russia-based telecommunications firm Mobile TeleSystems OJSC (ADR) (NYSE:MBT). Longer term, the shares are staring up at a steep 48% year-to-date deficit -- as well as stiff resistance at their 160-day moving average. Option players, however, have been initiating long calls over puts at a near-annual-high clip. Specifically, the stock's 10-day ISE/CBOE/PHLX call/put volume ratio of 7.42 ranks higher than 90% of other such readings taken during the past 12 months. Similar to LULU, a brow-raising 57.9% of the stock's float is sold short, making it possible that some of this recent option activity could be at the hands of shorts hedging their bearish bets. Whatever the reason, premium on NQ's front-month options is currently priced at a relative bargain -- its SVI of 95% ranks in the 16th annual percentile.

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