Schaeffer's Investment Research analyst Andrea Kramer recaps put-option action ahead of October expiration
Among the equities attracting put players on Thursday were financial issue Hudson City Bancorp, Inc. (HCBK), semiconductor concern Advanced Micro Devices, Inc. (AMD), gambling company Wynn Resorts, Limited (WYNN), and tech firm NVIDIA Corporation (NVDA). Here's a quick roundup of some of the most popular put trades of the day:
- First up, HCBK was targeted by last-minute option bears. The stock saw almost 4,200 puts cross the tape - about eight times its average daily put volume. Nearly all of the action centered on the October 6 put, which saw more than 4,000 contracts change hands - mostly at the ask price, suggesting they were bought. Plus, put open interest at the strike skyrocketed overnight, pointing to eleventh-hour bearish bets. By purchasing the puts to open, the buyers are signaling they expect HCBK to retreat beneath the $6 level before the closing bell today, when October-dated puts expire.
- On the other hand, AMD put holders cashed in their chips ahead of expiration tonight. By the closing bell, the stock had seen roughly 14,000 puts change hands, more than twice its average daily put volume. However, put open interest at the October 8 strike depleted by more than 2,900 contracts overnight, while the deeper in-the-money October 9 strike saw open interest decrease by more than 500 contracts.
- Similarly, put holders also took profits on WYNN, which fell more than 5% yesterday on the heels of a poorly received earnings report. During the course of the session, the security saw around 25,000 puts traded, compared to its average daily volume of around 12,000 puts. Digging deeper, it appears speculators liquidated their winning positions at the October 125 and October 130 puts, which saw open interest backpedal by around 930 contracts and 660 contracts, respectively. In early trading, though, WYNN has pared some of yesterday's deficit, thanks to an upgrade to "outperform" from "market perform" at BMO.
- Finally, it seems a handful of speculators are betting on short-term support for NVDA. Specifically, the stock's at-the-money October 14 put saw nearly 3,900 contracts cross the tape yesterday - 72% of which traded at the bid price, suggesting they were sold. Plus, put open interest at the soon-to-expire strike jumped by 1,350 contracts overnight, confirming the initiation of fresh last-minute positions. By writing the puts to open, the sellers are expecting NVDA to end today's session north of the $14 level.
Best regards and good trading,
Andrea Kramer / Schaeffer's Investment Research holds no positions in any securities mentioned in this post.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options available at http://www.tradeking.com/ODD.
Multiple leg options strategies involve
additional risks and multiple commissions, and may result in complex tax treatments. Please consult a tax professional prior to implementing these strategies.
All investments involve risk, losses may exceed the principal invested, and the past performance of a security, industry, sector, market, or financial product does not guarantee future results or returns. TradeKing provides self-directed investors with discount brokerage services, and does not make recommendations or offer investment, financial, legal or tax advice. You alone are responsible for evaluating the merits and risks associated with the use of TradeKing's systems, services or products.
TradeKing selects and defines as All-Stars certain independent market commentators who are recognized industry personalities and experienced traders and who provide timely market commentary via the TradeKing All-Star blog at http://community.tradeking.com/members/tk-all-star/blogs. Each All-Star commentator’s bio, related qualifications and disclosure as to their relationship with TradeKing can be found on the All-Star blog roster, available at http://community.tradeking.com/members/tk-all-star/details. The selection of All-Stars commentators is solely based on the quality and style of the content provided. TradeKing does not measure, endorse, or monitor the performance or correctness of any statement or recommendation made by independent All-Stars commentators on TradeKing.com. Supporting documentation for any claims made by an All-Stars will be supplied upon request by the author, who is solely responsible for the views expressed. Send a private message to All-Stars using the link below the profile image.
Any strategies discussed and examples using actual securities and price data are for educational and illustrative purposes only and do not imply a recommendation or solicitation to buy or sell a particular security or to engage in any particular investment strategy. In reading content in the Trader Network, you may gain ideas about when, where, and how to invest your money. Although you may discover new ideas or rationale that may be compelling, you must ultimately decide whether or not to put your own money at risk. Consider the following when making an investment decision: your financial and tax situation, your risk profile, and transaction costs.
Schaeffer's Investment Research maintains a cross-marketing relationship with TradeKing.