Options Check-Up: Visa Inc, QUALCOMM, Inc., Lululemon Athletica inc.

Analyzing recent option activity on V, QCOM, and LULU


Published on Dec 4, 2014 at 7:50 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are blue chip Visa Inc (NYSE:V), communications giant QUALCOMM, Inc. (NASDAQ:QCOM), and yoga apparel maker Lululemon Athletica inc. (NASDAQ:LULU). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on V, QCOM, and LULU.

  • Since its mid-October low of $195.19, V has jumped 34%, ending yesterday 0.6% higher at $261.60. The steep gain was sparked by a better-than-expected fiscal fourth-quarter earnings report. In Visa Inc's options pits, speculators are expecting even more upside. For example, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), V's 10-day call/put volume ratio of 1.83 ranks in the 83rd percentile of its annual range, meaning calls have been bought to open over puts at a faster pace only 17% of the time in the last year. The equity's 30-day at-the-money (ATM) implied volatility (IV) stands at 15.6%, in the 16th annual percentile -- indicating relatively muted short-term volatility expectations.

  • In the past two months, QCOM has underperformed the broader S&P 500 Index (SPX) by over 6 percentage points. However, yesterday the equity gained 1.4% to finish at $74.37, and judging by activity in its options pits the past several weeks, traders expect additional gains. Specifically, at the ISE, CBOE, and PHLX, QUALCOMM, Inc.'s 50-day call/put volume ratio of 2.70 lands in the 81st percentile of its annual range. According to the security's Schaeffer's Volatility Index (SVI) of 18% -- in its 37th annual percentile -- its short-term options are somewhat inexpensive, from a volatility perspective.

  • LULU has had a tough go of it on the charts this year, down 22.6% year-to-date after yesterday's 0.7% loss put it at $45.71. Options traders appear to be stubbornly bullish, as the equity's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.80 ranks in the 93rd percentile of its annual range. However, this may due to short sellers protecting against any upward movement in the stock, as over one-fifth of its float is sold short. No matter the reasoning, volatility expectations for Lululemon Athletica inc. are high, as its 30-day ATM IV of 52% ranks higher than 93% of all similar readings taken in the past year.

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