Options Check-Up: Lululemon Athletica, SolarCity, and SodaStream

Analyzing recent option activity on LULU, SCTY, and SODA

by Griffin Kruse

Published on Dec 30, 2014 at 7:49 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are yoga apparel designer Lululemon Athletica inc. (NASDAQ:LULU), solar energy issue SolarCity Corp (NASDAQ: SCTY), and at-home carbonation specialist Sodastream International Ltd (NASDAQ:SODA). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on LULU, SCTY, and SODA.

  • LULU has had a rough year, dropping roughly 6.2% of its value year-to-date to settle at $55.38 -- despite a 1.1% gain yesterday, and outperforming the S&P 500 Index (SPX) by over 20 percentage points in the past three months. Meanwhile, sentiment in the stock's options pits is overwhelmingly bullish. Lululemon Athletica inc.'s 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.01 stands 5 percentage points away from an annual peak. Short-term options for the stock are relatively cheap at the moment, as its Schaeffer's Volatility Index (SVI) of 40% ranks in the 24th percentile of all similar readings from the past year.

  • Shares of SCTY have also underperformed in 2014, shedding roughly 1% year-to-date to sit at $56.26. However, option buyers have been purchasing calls over puts at a faster rate than usual -- SolarCity Corp's 50-day ISE/CBOE/PHLX call/put volume ratio of 2.40 ranks in the 81st percentile of its annual range. SCTY's short-term options are available for basement prices, as its SVI of 44% ranks in the 8th percentile of all similar readings taken in 2014. Short sellers have also taken an interest in the equity; short interest accounts for over 35% of the stock's float, which would take 7.6 sessions to cover, at average trading volumes. This activity indicates that the recent affinity for long calls could be attributable to short sellers looking for a hedge.

  • SODA's year has been dismal, as the security has lost 57.5% of its value year-to-date to perch at $21.07, and notched a fresh all-time low of $19.85 on Dec. 10. Additionally, SodaStream International Ltd has underperformed the SPX by roughly 31 percentage points over the past three months. Despite a brief surge in bullish bets earlier this month, sentiment in SODA's option pits has become appropriately bearish, with its 50-day ISE/CBOE/PHLX put/call volume ratio of 1.12 ranking higher than 91% of all other similar readings taken over the past year. Short-term bets on the stock can be had for a bargain right now, as SODA's SVI of 51% is lower than 71% of all comparable metrics taken in the previous 12 months.

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