Options Traders Cheer Post-Black Friday Gains from Amazon and Wal-Mart Stocks

Call open interest has nearly peaked on WMT

Nov 27, 2017 at 2:44 PM
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The 20 stocks listed in the table below have attracted the highest total weekly options volume during the past 10 trading days. Stocks highlighted in yellow are new entries to the list. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names to note coming off Black Friday are Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores Inc (NYSE:WMT), as retail stocks carry the major indexes to record highs. Below we'll break down recent options trading activity on AMZN and WMT.

unusual options activity november 27

Call Traders Get Sudden Returns from Amazon Stock

During the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 1.17 AMZN call options for every put, putting this ratio in the high 82nd annual percentile. In other words, it would seem Amazon options traders have been more bullish than normal lately.

Digging deeper, the December 1,200 call saw one of the largest increases in open interest during this time frame among contracts yet to expire. For those who bought to open options here, the goal was for AMZN stock to rise above $1,200 before front-month options expire at the close on Friday, Dec. 15.

Well, these calls have already moved into the money, as the FAANG stock earlier topped out at a record peak of $1,213.41, and was last seen trading at $1,203.12. The shares have already risen 25% this quarter, but options traders could again be betting on more upside, since calls today are trading at two times the expected rate.

It's still a good time to target short-term Amazon options, based on its Schaeffer's Volatility Index (SVI) of 19%, which ranks in the low 22nd annual percentile. This means volatility expectations for near-term contracts are unusually low at the moment.

Call Volume Nearly Peaks on Wal-Mart

Call buyers have also been active on Wal-Mart, as the security has a 10-day call/put volume ratio of 2.16 at the ISE, CBOE, and PHLX, which ranks in the 88th annual percentile. Seeing the largest increase in open interest by far during this time was the December 100 call, where nearly 29,000 positions were added. Data from the major exchanges points to mostly buy-to-open activity here, so these bulls are betting on WMT stock to top $100 in the coming weeks.

Elsewhere, the December 97.50 and January 100 calls also saw notable buy-to-open activity during this time. More near-term traders, meanwhile, targeted the weekly 12/1 97-strike call. As it stands now, call open interest on Wal-Mart ranks in the 99th percentile of its annual range.

Shares of the retailer are slightly higher today at $96.67, as they consolidate just below their Nov. 17 record high of $100.10. Year-to-date, WMT is up an impressive 40%, and even more upside could be coming, if more analysts start to come around. That is, just 10 of the 23 brokerage firms covering the retailer say it's worthy of a "buy" rating, so upgrades seem overdue.

Plus, the blue chip has an inviting SVI, like its retail rival. Specifically, its SVI of 18% ranks in just the 27th annual percentile.


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