The major market indices dipped slightly Monday, with Greek debt concerns weighing heavily on investor sentiment. The effect sent ripples through the options pits as well, with the CBOE put/call volume ratio rebounding sharply to a weekly high of 0.62, well above the ratio’s 10-day moving average.
Among the top 10 most active stocks in the options pits were AT&T Inc. (NYSE:T), Tesla Motors Inc (NASDAQ:TSLA) and Alibaba Group Holding Ltd (NYSE:BABA).
AT&T Inc. (T)
Bearish activity was palpable on communications giant AT&T Inc. on Monday. T stock was targeted heavily by put traders, with 63% of the roughly 97,000 contracts trading on the stock crossing on the put side. The stock’s price action didn’t help matters any, with the shares dipping below support at $34 and their 20-day moving average.
In the news, AT&T is being broadly panned for its latest strategy of charging $29 per month to opt out of Internet monitoring. The move is clearly a way for AT&T to compete with Google Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG) Google Fiber pricing model, allowing AT&T to monetize customer online activity. Given Wall Street’s reaction, so far, the policy might not have the intended effect.
Tesla Motors Inc (TSLA)
Electric car manufacturer Tesla Motors has been fighting an uphill battle since its poorly received quarterly earnings report hit the Street. Analysts at Bank of America Merrill Lynch added to the stock’s issues by lowering their price target to $65 from $70 and slashing their earnings estimates for 2015 through 2017. The brokerage firm cited, among other things, lagging production amid rising demand for the cuts.
Despite TSLA stock plunging 4.5% on the news, options traders had a mixed reaction. Specifically, yesterday’s volume of 135,048 contracts was split evenly between puts and calls. Weekly Feb. 27 series options have gained quite a bit of attention, with the in-the-money $207.50 and out-of-the-money $205 and $202.50 strikes gaining the lion’s shares of open interest.
TSLA stock is trading flat in Tuesday’s premarket trading despite an overall positive bias for U.S. stock futures.
Alibaba Group Holding Ltd (BABA)
Another stock that has been hammered due to earnings recently is Alibaba Group Holdings Ltd. BABA stock is down more than 15% since late January, with the shares flirting with support in the $85 region. BABA took another 1.35% hit Monday, as investors reacted to news of yet another class action lawsuit accusing Alibaba of “materially false and misleading statements.” The current suit is being brought by New York-based law firm Pomerantz, accusing Alibaba of negligence in disclosing information prior to its IPO.
Despite the negativity, options traders appear to be betting on a rebound for BABA stock. In Monday’s trading, 74% of the 86,545 contracts crossing on BABA traded on the call side of the coin. Much of this activity appears to be rollover activity following Friday’s February options expiration, with the weekly Feb. 27 series of options seeing heavy open interest accumulations at the out-of-the-money $88 and $90 call strikes.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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