Wall Street ended January on a low note on Friday, with the major market indices posting losses in three of the past four weeks. Among the top 10 most active stocks in the options pits were Yahoo! Inc. (NASDAQ:YHOO), Cisco Systems, Inc. (NASDAQ:CSCO), and Citigroup Inc (NYSE:C). As a result of Friday’s selloff, the CBOE equity put/call volume ratio rebounded from its recent low to finish at 0.68.
Yahoo! Inc. (YHOO)
Shares of YHOO tanked Wednesday and gapped lower Thursday as investors reacted to poor quarterly earnings from Alibaba Group Holding Ltd (NYSE:BABA). BABA shares were off more than 8%, while YHOO stock plunged in sympathy as Yahoo! retains a considerable stake in the company.
In the options pits, calls were more popular than puts on YHOO, with 59% of Friday’s volume trading on the call side. That said, YHOO weekly Feb. 6 series options were the most popular, with the $44 strike put garnering the most volume on Friday.
More than 2,500 contracts traded at the weekly Feb $44 put strike on open interest of 1,225 contracts, indicating that much of this activity was the initiation of fresh positions. These Feb $44 strike puts are currently trading at the money, with YHOO closing at $43.99 on Friday.
Cisco Systems, Inc. (CSCO)
Shares of CSCO stock plunged alongside the broader market on Friday, as traders pulled back from stocks during a weak showing in January. Despite Cisco’s poor short-term price action, options traders appear to be growing bullish on the stock, as 68% of Friday’s volume traded on the call side of the tape.
While Cisco is slated to release its latest quarterly report on Wednesday, Feb. 11, activity in the weekly Feb. 13 series was greatly overshadowed by the weekly Feb. 6 series (i.e., options that expire at the end of this week). The most active call strikes were the $27.50 and $28 strikes, each seeing volume in excess of 1,300 contracts.
With CSCO closing at $26.36 on Friday, these $27.50 and $28 strike calls are currently out of the money. Technically, CSCO stock has broken down recently, and the stock has been pressured into potential support at its 20-week moving average (in the $26 region). A breach of this support could be quite bearish for CSCO, as the $26 level has provided key support and resistance during the past several months.
Citigroup Inc. (C)
While most of the stocks in Friday’s top 10 most active options attracted call activity, the shares of Citigroup were a favorite among the bears. Some 61% of C’s options volume traded on the put side, as traders placed bets that the stock’s year-to-date decline of near 15% would extend through the first quarter of 2015.
The March series was the center of most of Friday’s activity on C stock. In particular, the March $45, $46, $47 and $50 strikes were the most active, attracting volume of between 2,400 and 3,000 contracts each. Open interest at these strikes was well in excess of Friday’s volume, so we will have to wait until later this morning for translation in order to see if new put contracts were opened at these strikes for C.
Currently, only the March $45 strike is out of the money.
This flood of put volume could be in response to C dropping below key technical support at the $50 level last week. C stock spent the middle of 2014 languishing beneath the $50 level before finally breaking out in late-August.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
