Stocks quoted in this article:
Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Sprint Nextel Corporation (NYSE:S), American International Group Inc (NYSE:AIG), and The Procter & Gamble Company (NYSE:PG). Here is a quick look at today's interesting activity in these options pits.
Sprint Nextel Corporation's (NYSE:S)
$7 mark has been a popular target of option players
recently, and in today's session, traders are betting on a quick retreat south of this level. A healthy portion of the 4,621 June 7 puts
that have traded have done so at the ask price, implied volatility has jumped 5.4 percentage points, and data from the International Securities Exchange (ISE) confirms that a number of positions have been bought to open. The volume-weighted average price (VWAP) for the out-of-the-money (OTM) calls is $0.05, meaning traders will begin to profit with each step south of $6.55 (strike price less VWAP) S takes through this Friday's close. S is presently priced at $7.25
and has not traded south of $7 on an intraday basis since April 15. Should the equity fail to breach the strike price, the most today's speculators have risked is the modest premium paid. Fundamentally, the company has scheduled a special shareholders' meeting for June 25 to vote on SoftBank's proposed $21.6 billion bid
American International Group Inc (NYSE:AIG) has recently met its technical match near $45.50, prompting some speculators today to bet on a continued battle with this overhead level, at least in the short term. Of the 2,232 June 45.50 calls that have been exchanged, 63% have gone off at the bid price, and implied volatility is on the rise -- two indications of sell-to-open activity. Ideally, AIG will finish the week south of this mark, allowing the OTM calls to expire worthless, and the traders to retain the initial credit collected. According to Trade-Alert, the VWAP for the calls is $0.60. With AIG churning in the $43-$46 range since early May -- the stock is currently perched at $45.39 -- this could also be part of a larger covered-call strategy, in which shareholders are looking to increase their rate of return. Widening the scope reveals that using options as a hedge has been a popular strategy on AIG in recent weeks.
Puts are popular in The Procter & Gamble Company's (NYSE:PG) options pits today, although the stock has tacked on 1.6% to trade at $79.25. One of the more active strikes is PG's June 77.50 put, where 1,938 contracts have traded for a VWAP of $0.22. The vast majority of these positions have traded at the ask price, and implied volatility is up 4.3 percentage points, hinting at the initiation of new positions. Based on the VWAP, speculators will begin to profit with each notch south of $77.28 PG takes through week's end. Delta for the put is docked at negative 0.17, indicating a 17% chance the position will make its way into the money ahead of expiration. Today's penchant for puts only highlights the withstanding trend, as evidenced by data from the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). During the course of the past 10 sessions, traders at these exchanges have bought to open more than two puts for every call. What's more, the resultant put/call volume ratio of 2.35 ranks higher than 86% of similar readings taken in the past year, pointing to a bearishly skewed bias in PG's options pits.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.