Options Check-Up: AbbVie Inc., Broadcom Corporation, and Chevron

Analyzing recent option activity on AbbVie Inc (ABBV), Broadcom Corporation (BRCM), and Chevron Corporation (CVX)

Jan 29, 2015 at 8:49 AM

Among the stocks attracting attention from options traders lately are drugmaker AbbVie Inc (NYSE:ABBV), semiconductor issue Broadcom Corporation (NASDAQ:BRCM), and oil giant Chevron Corporation (NYSE:CVX). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on ABBV, BRCM, and CVX.

Shares of ABBV have been trending lower since hitting a record peak of $70.76 in early December, with shares declining 12.6% to rest at $61.85. AbbVie Inc is set to release fourth-quarter earnings data before the open on Friday, and bearish sentiment in the stock's options pits has been ramping up. ABBV's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 3.17 is just 2 percentage points from an annual high. Meanwhile, short-term volatility expectations are fairly modest -- 30-day at-the-money implied volatility on ABBV is 26%, in the 73rd annual percentile.

BRCM has been on a tear, gaining 28.6% since the end of May to hit $40.97. However, ahead of tonight's earnings report, sentiment in the stock's options pits is bearish, with Broadcom Corporation's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.66 registering in the 94th percentile of its annual range. Expectations for a big post-earnings move are growing, too, as BRCM's Schaeffer's Volatility Index (SVI) of 34% is higher than nearly three-fourths of all similar readings taken over the past year.

CVX is in the middle of a rough patch, with the shares down 23.2% at $103.71 since hitting an all-time high of $135.10 on July 24. Accordingly, sentiment in the options pits is bearish, with Chevron Corporation's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.92 sitting in the 70th percentile of its annual range. What's more, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.74 is the highest reading taken in the last 52 weeks, suggesting short-term speculators are much more put-heavy than usual on CVX. Traders are paying a fair price for their near-term bets on the equity, per its SVI of 24%, which is in the 58th percentile of its annual range.

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