Weekly Options Bulls Blast Whole Foods Market, Inc. (WFM)

Whole Foods Market, Inc. (NASDAQ:WFM) is higher today, and options traders are eyeing more upside

by Karee Venema

Published on Aug 22, 2016 at 2:18 PM
Updated on Jun 24, 2020 at 10:16 AM

Stock volume has spiked on Whole Foods Market, Inc. (NASDAQ:WFM), although the catalyst is unclear. At last check, roughly 7.8 million WFM shares have traded -- in the 93rd annual percentile -- while the stock is up 2.8% at $31.13. The positive price action has sparked a fire in WFM's options pits, too, with calls crossing at three times what's typically seen at this point in the day, and outpacing puts by a more than 7-to-1 ratio.

Most active is WFM's weekly 8/26 31-strike call, where 6,208 contracts have traded. It looks like new positions are being purchased here -- a theory echoed by Trade-Alert -- meaning options traders are betting on a bigger rise through Friday's close, when the weekly series expires.

Widening the sentiment scope reveals call buying has been a popular strategy in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, WFM's 50-day call/put volume ratio of 2.07 ranks in the 79th annual percentile. However, with more than 12% of the equity's float sold short, some of this action may be short sellers hedging their bearish bets against any upside risk.

Regardless of the reason, now appears to be an opportune time to strike on WFM. Specifically, the security's Schaeffer's Volatility Index (SVI) of 21% ranks lower than 99% of all comparable readings taken in the past year. In other words, premium on the stock's near-term options are pricing in relatively low volatility expectations at the moment -- a potential boon for options buyers.

On the charts, WFM has turned in a choppy performance over the past 52 weeks, stuck trading in the $28-$36 range. Based on its most current price, the shares of Whole Foods Market, Inc. (NASDAQ:WFM) are down 2.1% year-over-year, and 7% year-to-date.

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