Most Active Options: Valeant Pharmaceuticals Intl Inc and Alcoa Inc

Valeant Pharmaceuticals Intl Inc (VRX) and Alcoa Inc (AA) have attracted unusual call volume of late

Mar 7, 2016 at 1:52 PM
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The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks 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 drugmaker Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and aluminum stock Alcoa Inc (NYSE:AA).

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VRX is 7.6% higher at $65.96, after the company said it will unveil its fourth-quarter earnings -- which were delayed last week -- on Tuesday, March 15. It appears speculators are hoping for some positive news during the conference call, despite a regulatory probe hanging over Valeant's head.

Amid last week's drama, VRX hit a two-year low of $59.87. However, from Monday to Friday, call open interest grew by 83,000 contracts, and touched an annual high of more than 394,000 calls outstanding. Furthermore, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.07 sits higher than just 23% of all other readings from the past year, suggesting near-term traders are more call-biased than usual right now.

Echoing that, call volume today is running at 1.7 times the average intraday clip. It looks like some speculators may be buying to open the March 65 call, in hopes that Valeant Pharmaceuticals Intl Inc (NYSE:VRX) extends its rebound north of $65 through the close on Friday, March 18 -- when front-month options expire, and just days after Valeant's rescheduled earnings release.

AA is up 4.2% at $9.97, as commodity stocks enjoy tailwinds. Alcoa has been on a tear since hitting a six-year low of $6.14 in mid-January, surging more than 62%. In fact, the stock is on pace to end atop its 200-day moving average for the first time in more than a year.

Against this backdrop, AA call options have been hotter than usual, with volume hitting an annual high of more than 141,000 contracts on Friday. Today, AA calls are crossing at three times the average intraday clip, with most of the action attributable to a 70,000-contract spread at the July 8 and 11 calls -- the same strikes that comprised most of Friday's volume.

However, it's worth noting that short interest on AA represents more than 15% of the stock's total available float. At the equity's average daily trading volume, it would take more than a week to buy back these bearish bets. As such, it's possible that some of the recent affinity for Alcoa Inc (NYSE:AA) calls -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge.


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