Hitting the top of today’s Options Hotlist is Motorola MOT, which is seeing a rush of put buying at the October 8 put strike. This put volume has been trickling in through the session and currently stands at more than 21,000 contracts. The in-the-money puts are currently up 11 cents on the day at $1.69 while the shares have dropped five cents to $6.46. The simple fact that the options have moved more than the underlying indicates that implied volatility is on the rise amid buying demand. Heading into today, open interest stood at more than 47,000, making it harder to determine whether today’s put buyers are trading these options to open or to close.
MOT July 7 puts are also active among buyers, with 10,000 contracts hitting the tape and trading for 59 cents apiece. The 30,000-plus options already trading between these two strikes easily dwarfs average daily option volume across all Motorola strikes, which is around 9,000 contracts.
If these traders are indeed opening new long puts, they risk 100% of the premium paid but can make up to $6.31 in profit in the unlikely event that Motorola shares drop all the way to zero. At expiration, breakeven for this long put would be $6.31, or the put strike minus the premium paid. Yesterday, Motorola filed a Form 10 for Motorola SpinCo, renewing speculation that the telecommunications firm may spin off its mobility division.
For more information on how the OptionsHouse Hotlist functions, refer to this article.
Also hitting the hot list today are a pair of biotech names – Genzyme Corporation GENZ and Biogen Idec Inc. BIIB. Rumors that France’s largest drugmaker, Sanofi-Aventis SNY, could be looking Stateside for a takeover target have driven these stocks higher on the day and inspired some options traders. Nearly 16,000 contracts have traded in Biogen already today while more than 14,000 contracts have traded in Genzyme. Call activity is easily outweighing put activity in both names, and the July and August expiration months are seeing the majority of the volume.
Following this morning’s mixed nonfarm payrolls report, which showed a surprise drop in the unemployment rate despite lower-than-expected job growth in the private sector, the markets are modestly lower. The Dow has dropped 30 points today after spending six days in the red, the S&P 500 is virtually unchanged, and the Nasdaq Composite is down less than one fifth of one percent.
Photo Credit: Nan Palmero
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