Oclaro, Inc. (OCLR) Halo Lift Sparks Bullish Options Betting

Oclaro, Inc. (NASDAQ:OCLR) hit a five-year high earlier, following a positive earnings reaction for Acacia Communications, Inc. (NASDAQ:ACIA)

Aug 12, 2016 at 2:26 PM
facebook twitter linkedin

An earnings-induced surge for fiber optics specialist Acacia Communications, Inc. (NASDAQ:ACIA) is helping to lift fellow tech stock Oclaro, Inc. (NASDAQ:OCLR). At last check, OCLR was up 10.4% at $6.89 -- fresh off a five-year high of $6.94 -- and options bulls are blasting the stock. In fact, OCLR call options are crossing at five times the average intraday rate, and outpacing put options by a 243-to-1 margin.

Almost all of the day's options activity has centered at OCLR's August 7 call, where 5,731 contracts have changed hands. The bulk of this action is a result of a sweep of 5,000 contracts that Trade-Alert indicated was bought to open for $100,000 (number of contracts * $0.20 premium paid * 100 shares per contract).

This initial cash outlay is the most the call buyer stands to lose, should the option expire out of the money. Profit, meanwhile, will accelerate with each step north of breakeven at $7.20 (strike plus premium paid) OCLR takes through next Friday's close, when the front-month options expire. As a point of reference, OCLR hasn't traded north of $7 since July 2011.

Today's exaggerated skew toward calls is nothing new in OCLR's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculative players have bought to open 3,919 calls on OCLR in the past two weeks, compared to just 20 puts. The stock's September 7 call has seen the biggest rise in open interest over this time frame, with 768 contracts added.

Looking elsewhere, there could be an ulterior motive to this recent rush toward long calls, particularly those that are out of the money. Short interest on OCLR rose 2% in the most recent reporting period, and is currently docked at a record high 27.9 million shares. As such, it's possible short sellers are using the options to hedge their bearish bets.

Regardless of the reason, now appears to be an opportune time for options buyers to strike on the stock, considering volatility expectations have declined in the wake of Oclaro, Inc.'s (NASDAQ:OCLR) own blowout earnings report. In fact, OCLR's Schaeffer's Volatility Index (SVI) of 62% ranks lower than 92% of all comparable readings taken in the past year, meaning premium on the equity's short-term options is relatively tame at the moment.

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.

If you are not making money with options, you aren’t buying options like this…

There is no options strategy that more perfectly approaches trading the fastest moving and most volatile stocks available in the marketplace than this one. In fact, there is no strategy that better utilizes put options for optimal returns and a real trading edge over other traders in the exact same market. New options traders fail out at an incredible rate without proper trade research, execution timing, and option picking. Capitalize on Schaeffer’s 100+ years of options trading excellence with the most coveted product launch in company history. Don't waste another second... join us right now before the next round of trades are released!



Special Offers from Schaeffer's Trading Partners