Most Active Options: Amazon.com, Inc. and Valeant Pharmaceuticals Intl Inc

Option traders are looking to Amazon.com, Inc. (NASDAQ:AMZN) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

Celeste Taylor
Oct 18, 2016 at 1:03 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 online retailer Amazon.com, Inc. (NASDAQ:AMZN) and Valeant Pharmaceuticals Intl Inc (NYSE:VRX).

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AMZN is on the move, after fellow "FANG" stock Netflix, Inc. (NASDAQ:NFLX) reported blowout earnings. The booming e-tailer is set to report its own quarterly results next week. Today, AMZN is up 1.1% at $821.74.

So far this year, AMZN is up over 43%, and touched a record-high of $847.21 earlier this month. AMZN has been enjoying support from its 50-day moving average, which has contained its pullbacks since March. With all of its technical strength, it's no wonder analysts love AMZN, with 28 of 31 rating the shares a "buy" or better, and with only a solitary "sell" on the books.

However, option players have been unusually bearish towards AMZN. AMZN's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) currently sits at 1.06, higher than 86% of all other readings from the past year. However, considering the stock's strength, it's possible that some of those recent put buyers are AMZN shareholders seeking an options hedge, in the event of a pullback.

Meanwhile, near-term traders are still more call-biased than usual, with AMZN's Schaeffer's put/call open interest ratio (SOIR) of 0.94 sitting in just the 19th percentile of its annual range. AMZN's top front-month open interest position is the out-of-the-money October 860 call, which sits in uncharted territory for AMZN. The October 860 call is among AMZN's most active options over the last 10 days, with a mix of buy- and sell-to-open action.

While some of these buyers could be "vanilla" AMZN bulls, it's also possible that there's a number of short sellers seeking a hedge by buying deep out-of-the-money calls, especially given short interest in AMZN has surged 29.2% over the last reporting period -- though shorted shares still only account for 1.6 days' worth of trading, Amazon.com, Inc.'s (NASDAQ:AMZN) average daily volume.

Meanwhile, VRX recently unveiled "responsible" drug-price hikes, as the company treads lightly in the wake of its "predatory pricing" scandal. Valeant was among the first pharma stocks in Democratic presidential candidate Hillary Clinton's crosshairs, culminating in investigations into distribution and price gouging, and the resignation of its CEO, not to mention a dismal turn on the charts.

So far today, VRX is up 1% at $21.61, though its year-over-year losses still amount to roughly 88%. Just since mid-August, the shares have dropped roughly 35%, under pressure from their 10-day moving average. However, the $20-$21 level contained most of the stock's mid-year dips.

In the option pits, VRX's 10-day ISE/CBOE/PHLX call/put volume ratio of 2.23 is in the top 74% of all other readings from the past year, indicating a healthier-than-usual appetite for long calls over puts during the past two weeks. In addition, VRX's SOIR of 0.86 is in just the 30th percentile of its annual range, suggesting a stronger-than-usual near-term call bias among option players.

Drilling down, much of the action in VRX's option pits over the last 10 days can be attributed to a massive spread initiated on Oct. 6, at the January 2017 27.50- and 42.50-strike calls, where over 26,000 contracts crossed the tape at each strike, although the details of the trade still remain unclear. As such, the January 2017 27.50-strike call is now home to Valeant Pharmaceuticals Intl Inc's (NYSE:VRX) peak open interest, while the October 35 call is the top front-month open interest position. 

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