Speculators Target Whole Foods Market, Inc. (WFM) Calls

Whole Foods Market, Inc. (WFM) saw a surge in call activity yesterday


Published on Jan 13, 2015 at 11:14 AM
Updated on Apr 20, 2015 at 5:09 PM

Whole Foods Market, Inc. (NASDAQ:WFM) is keeping momentum from yesterday's 3.7% gain, adding 0.9% today to trade at $52.30. Taking a step back, yesterday's price action sparked an increase of activity in the equity's options pits. The stock's 30-day at-the-money implied volatility jumped 34% to 33.1%, showing an increased demand for short-term contracts.

Speculators took a bullish stance on WFM yesterday, as calls traded at a rate nearly six times what's normally seen. In fact, all 10 of the equity's most active strikes were calls, with the January 2015 52.50 and 51.50 strikes leading the way. It appears most of the contracts that crossed at these strikes were bought to open, meaning speculators expect WFM to settle above the respective strikes by this Friday's close, when front-month options expire.

Yesterday's focus on calls was just more of the same for the stock, per its 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading of 3.74 ranks in the 88th percentile of its annual range, showing a healthier-than-normal appetite for calls over puts.

However, considering 8.7% of Whole Foods Market, Inc.'s (NASDAQ:WFM) float is sold short, some of this call buying could be the work of short sellers hedging against an upturn in the underlying. At a glance, WFM has outperformed the broader S&P 500 Index (SPX) by 29 percentage points in the past three months.

Daily Chart of WFM since October

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