Options Check-Up: Chesapeake Energy, LinkedIn Corp, and Zynga Inc

Analyzing recent option activity on CHK, LNKD, and ZNGA

Dec 17, 2014 at 8:19 AM
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Among the stocks attracting attention from options traders lately are oil-and-gas issue Chesapeake Energy Corporation (NYSE:CHK), professional networking platform LinkedIn Corp (NYSE:LNKD), and internet gaming guru Zynga Inc (NASDAQ:ZNGA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on CHK, LNKD, and ZNGA.

  • CHK has had a less-than-stellar year, shedding nearly 20% year-to-date, despite a 1.3% gain yesterday to close at $17.45. Unsurprisingly, sentiment in the equity's options pits is decidedly bearish. Chesapeake Energy Corporation's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 2.11 is at an annual peak, pointing to a healthier-than-usual appetite for long puts over calls of late. The stock's short-term options are currently expensive, on a volatility basis, per its Schaeffer's Volatility Index (SVI) of 68%, which ranks in the 84th percentile of its 52-week range.

  • Shares of LNKD have added roughly 58% since their early May bottom near $140, ushered higher atop their 10-week and 20-week moving averages. Even with this recent growth, the stock dropped 1.1% yesterday amid broad-market headwinds to sit at $215.57. Options traders remain bearish on LinkedIn Corp, with its 10-day ISE/CBOE/PHLX put/call volume ratio of 1.06 ranking higher than 85% of all similar readings taken in the past year. From a contrarian perspective, an unwinding of pessimism in the options pits could translate into more upside for LNKD. Per the equity's SVI of 36% -- which is in the 22nd annual percentile -- LNKD's near-term options are fairly cheap, from a volatility standpoint. Furthermore, the stock's Schaeffer's Volatility Scorecard (SVS) of 87 indicates the shares have tended to make outsized moves over the past year, relative to what the options market has priced in.

  • ZNGA has taken a dive this year, shedding nearly 38% of its value. Continuing this trend, yesterday the stock lost 3.1% to close at $2.36. Despite this extended slide, speculators have remained staunchly bullish. Per the equity's 50-day ISE/CBOE/PHLX call/put volume ratio, 8.51 calls have been bought to open for every put. Additionally, this ratio is in the 83rd percentile of its annual range, showing a bigger-than-usual preference for bullish bets over bearish. Zynga Inc's short-term options can be had at a relative bargain, on a volatility basis, as its SVI of 62% ranks in the 27th percentile of its annual range.
 

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