Most Active Options: Sunedison Inc and Alibaba Group Holding Ltd

Put volume is exploding on sinking Sunedison Inc (SUNE) and Alibaba Group Holding Ltd (BABA)

Jan 7, 2016 at 10:56 AM
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The 20 stocks in the table below have attracted the highest total 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 names of notable interest are alternative energy issue Sunedison Inc (NYSE:SUNE) and China-based e-tailer Alibaba Group Holding Ltd (NYSE:BABA).

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SUNE is swooning today, down over 18% at $4.50 after the company announced the pricing of a $725 million second lien secured term loan -- a larger credit facility than originally anticipated. This is just more of the same for a stock that's lost half of its value since October, when it was hovering in the $9 range.

Short sellers are certainly in good shape, with 45.3% of SUNE's float sold short. So too are option bears. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 1.04 puts for every call in the past 10 sessions. The corresponding put/call volume ratio ranks in the 88th percentile of its annual range.

With Sunedison Inc on the short-sale restricted list today, option volume is surging -- especially on the put side of the aisle, where contracts are trading at five times the usual intraday rate. Most active is the January 2016 4 strike, where it appears speculators are buying new positions, expecting the shares to breach $4 by next Friday's close, when the options expire.

BABA is also getting brutalized this morning, down over 4% at $73.96, after a sell-off on Chinese markets triggered a circuit breaker. The stock is no stranger to sharp losses, surrendering nearly 30% of its value on a year-over-year basis. Looking more closely, the shares are on track to close south of their 80-day moving average for the first time since Oct. 22.

Not surprisingly, BABA puts are changing hands at quadruple the expected intraday clip. In the lead is the January 2016 65 strike, which traders may be buying to open. If this is the case, the bearish bettors foresee a move south of $65 by front-month expiration next Friday.

Taking a step back, short interest as been on the rise, popping 14.6% during the latest reporting period. Now, nearly 97 million Alibaba Group Holding Ltd shares are sold short, which would take over a week to cover, at typical volumes.
 

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