Options Check-Up: Honeywell, Sears Holdings, Verizon Communications

Analyzing recent option activity on HON, SHLD, and VZ

by

Published on Dec 2, 2014 at 8:00 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are manufacturing issue Honeywell International Inc. (NYSE:HON), retailer Sears Holdings Corp (NASDAQ:SHLD) and telecommunications firm Verizon Communications Inc. (NYSE:VZ). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on HON, SHLD, and VZ.

  • Options bulls have been rushing to HON in the past two weeks, as its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 11.13 is higher than all similar readings taken in the last year. Honeywell International Inc.'s options are on the inexpensive side, from a volatility perspective, per its Schaeffer's Volatility Index (SVI) of 13%, which lands in the 13th percentile of its annual range. The security is up a modest 7% year-to-date, but has added nearly 18% since hitting an annual low of $82.89 in mid-October, closing at $97.78 yesterday.

  • It's been a rocky 12 months for SHLD, which is off 26.7% year-over-year, and finished yesterday's session down another 0.5% at $35.98. Options traders at the ISE, CBOE, and PHLX are looking for the stock to rebound, though. The equity's 10-day call/put volume ratio across those exchanges is 1.84, a number that ranks above 80% of all other readings taken in the last 52 weeks. Sears Holdings Corp's SVI of 79% lands in its 22nd annual percentile, implying near-term options are relatively inexpensive at the moment -- despite the company's upcoming earnings report, scheduled for release ahead of Thursday's open.

  • Despite gaining only 2% in 2014, sentiment surrounding VZ remains almost entirely bullish. At the ISE, CBOE, and PHLX, speculators have bought to open 4.92 calls for every put in the last two weeks. What's more, this ratio sits only 4 percentage points from an annual bullish extreme. The analyst community also holds the equity in high regard, with covering firms handing out 19 "buy" or better recommendations, five "holds," and zero "sells." Verizon Communications Inc.'s SVI of 12% ranks in the 21st percentile of its annual range, revealing, on a volatility basis, its short-term options are far from expensive. VZ closed yesterday at $50.11, a loss of 1%.


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