Schaeffer's 43rd Anniversary Stock Picks in 2024

Most Active Options: Alibaba Group Holding Ltd and Twitter Inc

Alibaba Group Holding Ltd (BABA) and Twitter Inc (TWTR) have attracted notable options volume recently

Nov 19, 2015 at 11:59 AM
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The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two notable names are Chinese e-tailer Alibaba Group Holding Ltd (NYSE:BABA) and microblogging concern Twitter Inc (NYSE:TWTR).


BABA is in the headlines today, with Starboard Value LP urging Yahoo! Inc. (NASDAQ:YHOO) not to spin off its BABA stake, citing tax concerns. In late September, YHOO vowed to continue with its planned spin-off, despite potential tax consequences, but Starboard suggests Yahoo sell its display advertising and core search business instead.

During the past two weeks on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), BABA has racked up a 10-day put/call volume ratio of 0.57 -- higher than 72% of all other readings from the past year. In other words, option buyers have bought to open puts over calls at a faster-than-usual clip during the past two weeks.

BABA's Schaeffer's Volatility Scorecard (SVS) stands at a lofty 88, indicating the stock has tended to make outsized moves over the past year, relative to what the options market has priced in. Or put differently, now is an opportune time to buy BABA's short-term options, it seems.

Recent traders have been looking to January, with the January 2016 85-, 95-, and 100-strike puts accumulating a notable number of new positions. "Vanilla" buyers of the puts expect BABA to extend its trek south of the strikes through expiration on Friday, Jan. 15.

Since edging north of $85 earlier this month, the shares of BABA have surrendered roughly 8% beneath their 10-day moving average, with the stock last seen at $78.33. Alibaba Group Holding Ltd (NYSE:BABA) shares even closed lower on Singles Day -- Nov. 11 -- despite reporting blowout numbers, marred by a word of warning from CEO Jack Ma and skepticism stemming from a recommendation from short seller Jim Chanos.

Moving on, TWTR is also in the headlines due to an affiliate. Specifically, Square (NYSE:SQ) -- which shares a common thread in CEO Jack Dorsey -- debuted to much fanfare today. While its IPO priced lower than expected, at $9 per share, SQ opened at $11.20, and peaked at $14.78 earlier. TWTR is following the mobile payments company's lead, up 2% at $26.42 -- and on pace to end atop its 10-day moving average for the first time since Oct. 28.

On the ISE, CBOE, and PHLX, TWTR calls have been flying off the shelves at a faster-than-usual pace. The equity's 10-day call/put volume ratio of 3.21 indicates buyers have picked up more than three TWTR calls for every put during the past two weeks, and stands higher than 77% of all other readings from the past year.

The overhead 30 strike attracted notable attention, with the January 2016 and March 30 calls seeing the biggest open interest increases over the past two weeks. If the call buyers are "vanilla," they expect TWTR to take back the round-number strike -- which has emerged as a technical speed bump during the past few months -- by the respective expiration dates of Jan. 15 and March 18.

However, it's worth noting that short interest on Twitter Inc (NYSE:TWTR) grew by 28.5% during the past two reporting periods, and now accounts for more than 10% of the stock's total available float. Against this backdrop, it's possible that buyers of the out-of-the-money calls are merely hedging their short positions.

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