The prospect of a Greek debt deal prompted a rally among U.S. stocks on Monday.The S&P 500 climbed back above the 2,120 mark, while the Nasdaq Composite broke out to fresh all-time highs. Options volume remained on the moderate side, with volume arriving just below average on the day. Overall, the CBOE equity put/call volume ratio dipped to 0.56, while the 10-day moving average edged lower to 0.60.
Taking a closer look at yesterday’s top equity options activity, Facebook Inc (NASDAQ:FB) call volume spiked after Piper Jaffray upped its price target on FB stock, while Ambarella Inc (NASDAQ:AMBA) was hammered more than 20% lower after Citron Research issued a scathing research note regarding the company’s valuation.
Finally, Williams Companies Inc (NYSE:WMB) attracted record options activity after the company rejected a buyout offer from an unidentified suitor.
Facebook Inc (FB)
FB stock jumped 2.7% on Monday, pushing the shares toward a rematch with resistance in the $85 region. Driving FB gains was a price-target increase to $120 from $92 at Piper Jaffray. The brokerage firm also reiterated its “overweight” rating on the stock. Currently, Thomson/First Call reports that the consensus 12-month price target for FB rests at $96 per share.
Options volume for FB stock was well above average, with 329,102 contracts changing hands on Monday. Furthermore, the activity appeared to hold with the day’s bullish theme, as calls accounted for 71% of all FB options volume.
Looking at the week ahead, options traders appear to be anticipating a showdown at $85, with peak open interest of 11,209 contracts residing at the weekly June 26 series $85 strike. By contrast, peak put open interest for the series totals just 3,966 contracts at the out-of-the-money $83 strike.
Ambarella Inc (AMBA)
After surging more than 140% year-to-date, and trading in overbought territory for the better part of the past month, AMBA stock finally suffered a correction on Monday. AMBA stock plunged nearly 21% after known short-seller Citron Research blasted AMBA’s lofty valuation — which rested at 15 times trailing revenue before Monday’s drop. Citron set a 12-month price target of $60, less than half the stock’s recent high, and an 18-month target of $40.
The report drove options volume on AMBA stock to levels not seen since just before the company’s quarterly earnings report, as 123,569 contracts changed hands on Monday. What’s more, Citron’s valuation concerns resonated with some traders, as options activity was split evenly between puts and calls, versus the usually call-heavy traffic AMBA has seen in recent weeks.
As you might expect, calls still dominate short-term open interest levels for AMBA. Peak open interest for the weekly June 26 series totals 1,547 contracts at the now-overhead $110 strike, while another 1,064 contracts are open at the $115 strike. Puts caught up quickly on Monday, however, with open interest rising at the $101 (1,475 contracts) and the $95 (1,533 contracts) put strikes.
Williams Companies Inc (WMB)
It’s rare to see a stock surge in the wake of a takeover rejection, but WMB stock did just that. The shares soared nearly 26% on Monday after Williams Companies announced it had turned down a $53 billion all-stock offer from Energy Transfer Equity LP because it valued the company improperly.
The post-rejection rally pushed WMB stock past former resistance at the $60 level and into all-time high territory. Options volume also neared record territory for WMB, with 186,050 contracts trading on the equity. Calls accounted for roughly 67% of Monday’s options traffic.
Options traders were quick to set the stage for this week’s trading activity, as volume at the 59.50, 60, and 61 strikes spiked in the weekly June 26 series. Peak open interest currently resides at the 60 strike, where 7,214 puts are now open, followed by 5,124 contracts at the 59.50 put. This appears to be put spread activity, though whether it is bullish (credit spread) or bearish (debit spread) is unclear. Peak call open interest, meanwhile, totals 3,120 contracts at the weekly June 26 series 61 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
