Honeywell International Inc. (HON) Put Volume Spikes Amid CEO News

While Honeywell International Inc. (NYSE:HON) announced a new CEO, put volume has been soaring

by Josh Selway

Published on Jun 29, 2016 at 10:54 AM

Aerospace manufacturer Honeywell International Inc. (NYSE:HON) is sitting out today's stock market rally, last seen 0.1% lower at $113.96. The dip comes after the company announced Darius Adamczyk will replace Dave Cote as CEO in 2017. In the meantime, HON options traders are watching today's move closely, as puts have been enormously popular of late. 

For instance, HON's Schaeffer's put/call open interest ratio (SOIR) of 2.13 reveals put open interest more than doubles call open interest among options expiring within three months. What's more, this SOIR sits above all other readings from the past year, meaning short-term traders are more put-skewed than at any point in the last 12 months. As a result, total put open interest on HON is at its highest point in a year. 

Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows that put buying has particularly been popular recently. The stock's 10-day put/call volume ratio across these exchanges comes in at an extremely elevated 8.57, which is just 1 percentage point from an annual high. However, put selling has been even more popular, according to ISE data, with more than 15,200 HON options sold to open in the past 10 days, compared to 12,300 that were bought to open. 

In the front-month July series, the 110 strike is home to peak put open interest, with data indicating traders have been both buying and selling to open positions here. Put buyers are looking for HON to breach $110 by the close on Friday, July 15, while the sellers want this level to hold as support through this expiration date. It's worth noting that HON shares took a strong bounce off this level earlier in the week. 

It's a good time to buy premium on HON options, too, according to the stock's Schaeffer's Volatility Index (SVI) of 18%. This reading sits below 85% of all others from the past year, meaning the options market is pricing in historically low volatility expectations at the moment. 

Outside the options pits, sentiment is mostly upbeat. Despite a 27% surge in the latest reporting period, short interest represents just 0.7% of HON's float. Plus, 13 of 15 covering analysts recommend buying the stock, and none have issued a "sell" rating. 

This lack of pessimism makes sense, given Honeywell International Inc.'s (NYSE:HON) long-term technical track record. The shares have steadily climbed since the end of 2011, and are still sporting a 10% year-to-date lead, despite the recent "Brexit" headwinds. In fact, HON stock touched an all-time high of $118.53 just last week. Given this strong performance on the charts, it's always possible some of the recent put buyers are actually shareholders looking for downside protection

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


a schaeffer's exclusive

PLAY TRENDS LIKE A PRO!

5 tips to leverage profits in this FREE insider report!


 
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


The Trend Minting Millionaires -- But Who Is Really Paying?
Porter Stansberry is making a concerning prediction.
Roller Coaster Week Defined by Trade Headlines, Jobs Report
The Dow made outsized moves in both directions this week
Needham is Buying Trade Desk Ahead of the 2020 Election
Trade Desk stock has more than doubled in 2019
The Trend Minting Millionaires -- But Who Is Really Paying?
Porter Stansberry is making a concerning prediction.