Wednesday’s Wall Street losses were extended but shallow as the major market indices continued to languish in fear of a potential Federal Reserve decision to raise rates sooner rather than later. Call option volume remained below average, as the CBOE put/call volume ratio held at 0.67, above its 10-day moving average of 0.64 — both at monthly peaks.
Among the top 10 most active stocks in the options pits? Salix Pharmaceuticals, Ltd. (NASDAQ:SLXP), Intel Corporation (NASDAQ:INTC) and Qualcomm, Inc. (NASDAQ:QCOM). Let’s look at the significance of the action in each one.
Salix Pharmaceuticals, Ltd. (SLXP)
Shares of biopharmaceutical company Salix Pharmaceuticals surged nearly 7% on Wednesday after the company received a new takeover offer from Endo International PLC. Salix had already received a bid from Valeant Pharmaceuticals International Inc. (NYSE:VRX). However, Endo’s offer of $175 per share has easily topped Valeant’s prior $158 per share bid, creating some competition for Salix.
Options traders jumped at the chance to speculate on the new offer, sending 120,947 contracts across the board in the SLXP options pits. Overall, some 86% of this volume traded on the call side, with short-term weekly and monthly March options topping the list. Peak open interest of 27,650 contracts resides at the weekly March 13 series $160 strike. This contract expires at the close tomorrow, and is currently more than 8 points in the money
Intel Corporation (INTC)
Options traders a can be a fickle bunch. Just yesterday we were discussing heavy put volume on Intel stock, as traders were concerned about broad weakness in the semiconductor sector. Today, we are looking at heavy call volume in the wake of news that Intel’s new 7360 LTE modem chips will oust Qualcomm chips in new Apple Inc. (NASDAQ:AAPL) iPhones starting in 2016. The inclusion in the popular iPhone marks a coup for Intel, as the company has struggled to get a serious foothold in the mobile market for some time.
On the day, some 196,416 contracts traded on INTC stock, with 64% of those crossing on the call side. With weekly March options expiring tomorrow, look for brisk short-term activity today and Friday. Meanwhile, monthly March options are also growing in popularity, possibly via rollouts from weekly contracts. Monthly contracts show a more put-heavy environment, however, with peak open interest of 45,424 contracts open at the in-the-money March $33 put.
In premarket trading, INTC appears to be headed toward a showdown with $33 today, as the shares are trading up fractionally at $32.45.
Qualcomm, Inc. (QCOM)
Shares of QCOM fell 2.25% on Wednesday, as news that Intel has usurped the company’s modem chips in new iPhones outweighed a price-target hike at Exane BNP Paribas, a 14% dividend hike and a $10 billion stock buyback plan. The reversal comes just as QCOM stock was in the process of testing resistance near its 200-day moving average as well, potentially adding technical selling pressure to the mix.
Options traders responded by sending volume of 100,877 contracts across the tape, with the focus naturally trending toward the put side, which consumed about 58% of yesterday’s activity. Should this put trend gain momentum, it could mark a reversal for QCOM options traders, as the equity’s put/call open interest ratio has trended lower since January, indicating a short-term preference for calls over puts.
A breach of support at $70, and subsequent breach of its 20-day moving average, could be a catalyst for a broader move toward put options.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
