Stocks finished broadly higher Thursday, placing the major market indices on track to finish higher for the second consecutive week. Call options continued to be popular, with the CBOE put/call volume ratio slipping to 0.55, well below the ratio’s 10-day moving average of 0.6. Among the top ten most active stocks in the options pits were Johnson & Johnson (NYSE:JNJ), Orbitz Worldwide, Inc. (NYSE:OWW), and Alibaba Group Holding Ltd (NYSE:BABA).
Johnson & Johnson (JNJ)
Blue-chip healthcare products firm Johnson & Johnson was targeted by unusually heavy options volume on Thursday, despite a lack of headline news. Roughly 223,000 contracts traded on JNJ option strikes, more than 15 times the stock’s average daily options volume of just 14,969 contracts.
A closer look at this activity reveals that 76% of this volume traded on the call side of the coin. The most unusual of this call volume took place in the soon-to-expire weekly Feb. 13 series of options. Specifically, 7,313 contracts traded at the Feb 13 $98.50 call, on open interest of just 41 contracts, while another 6,842 calls crossed on the Feb 13 $99 strike, which sports open interest of just 83 contracts.
Given the low open interest at these strikes, it seems likely that yesterday’s volume was the initiation of fresh positions. The Feb 13 $98.50 call is currently sitting right at the money, while the $99 strike is half a point out of the money. Both contracts expire at the close of trading this afternoon.
Orbitz Worldwide, Inc. (OWW)
The shares of online travel deal website Orbitz rocketed nearly 22% higher on Thursday after it was announced that rival travel firm Expedia Inc. (NASDAQ:EXPE) was buying the company for $12 per share. Orbitz also released fourth-quarter results yesterday.
By the numbers, Orbitz revenue rose 12% year over year to $221 million, leading to a 20% spike in earnings to 6 cents per share. Analysts were expecting earnings of 7 cents per share on revenue of $220.1 million.
Following the news, options traders piled into calls, with 91% of the 193,550 contracts trading on OWW stock crossing on the call side. It should be noted that much of this activity is either related to profit taking on the rally or arbitrage related to the EXPE buyout.
Alibaba Group Holding Ltd. (BABA)
Shares of Alibaba have been beaten down since the company offered up a disappointing earnings report at the end of January. As a result, BABA stock sank last week to its lowest point since October 2014. However, the shares appear to have found technical support in the $85 region, with BABA now testing the rebound waters.
With the shares gaining nearly 2% in the past two days, options traders seem to be edging toward a bullish stance on BABA stock. On Thursday, some 197,000 contracts traded on BABA, with 69% of those crossing on the call side. Short-term option premiums are relatively cheap for BABA at the moment, and opportunistic options traders may be looking to take advantage of the situation.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
