Wednesday’s Vital Data: Netflix, Inc. (NFLX), Wal-Mart Stores, Inc. (WMT) and MannKind Corporation (MNKD)

Wall Street finished flat on Tuesday, as investors used a slew of corporate earnings reports to pause and digest recent gains. The Dow Jones Industrial Average was the lone gainer on the day, while the S&P 500 and Nasdaq both ended fractionally lower. Options traders preference for calls rose slightly on the day, with the the CBOE put/call volume ratio dipping to 0.59, while the 10-day moving average came in at 0.62.

In options news, Wal-Mart Stores, Inc. (NYSE:WMT) drew call activity despite WMT stock being smacked lower in the wake of first-quarter earnings. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) options traders were divided even as the company was lauded in bullish comments from analysts at Pivotal Research. Finally, MannKind Corporation (NASDAQ:MNKD) continued to ride high and attract heavy call volume following a report from analysts at Jefferies.

Here’s a closer look at what prompted the latest options action in WMT, NFLX and MNKD:

05-20-2015 Top Ten Options

Wal-Mart Stores, Inc. (WMT)

WMT stock plunged more than 4% on Monday as traders reacted negatively to a weaker-than-expected rise in first-quarter results. Walmart earned $1.03 per share in the quarter on sales that rose to $114.83 billion. Wall Street, however, was expecting earnings of $1.04 per share on revenue of $116.27 billion. Walmart blamed higher worker pay and currency translation for the miss.

Options traders appear to be viewing the slip in WMT stock as a potential buying opportunity.  On the day, 149,590 contracts traded on WMT, with 58% of the session’s volume crossing on the call side. Currently, all major call open interest in the weekly May 22 series lies at overhead strikes, with the $80 strike home to peak OI of 9,103 contracts. Peak put OI, meanwhile, totals 3,848 contracts at the $77 strike, which is currently trading in the money.

Netflix, Inc. (NFLX)

NFLX stock slipped fractionally on Tuesday, even as the company received a bullish research note from Pivotal Research. Analysts at the brokerage upped their price target on the shares to $850 from $650 per share, setting a 31% premium on the stock. The consensus 12-month price target for NFLX currently rests at $600 per share.

Options volume was mixed on NFLX stock on Tuesday. The shares saw volume top 101,000 contracts, with calls and puts split nearly evenly on the session. Some trepidation is warranted from the options crowd at this point, as NFLX stock is trading in all-time high territory north of the $616 level. From an options standpoint, the next hurdle for NFLX stands at the $620 strike, where peak weekly May 22 series call open interest of 2,429 contracts currently resides.

In premarket trading, NFLX appears poised to challenge the $620 level, with the shares up roughly a half-percent at $619.40 at last check.

MannKind Corporation (MNKD)

MNKD stock has been on fire since Friday of last week, with the shares surging more than 31%. MannKind added 9% to the rally on Tuesday, with the possibility of short-covering adding fuel to the fire — as of the most recent reporting period, 100.9 million MNKD shares, or 38.6% of the stock’s float, were sold short.

Driving MNKD higher is a report from Shaunak Deepak at Jefferies. According to Deepak, demand for inhaled insulin drug Afrezza could be set to rise sharply as doctors become more familiar with the drug in the wake of MannKind’s coming advertizing campaign. Deepak said that a survey of doctors who knew about the drug revealed that they were prescribing it “more frequently than we had expected.”

MNKD stock option volume has surged following the report, tagging a near-term high of 118,773 contracts on Tuesday. Furthermore, calls appear to be the vehicle of choice, with 66% of Tuesday’s volume trading on the call side. Looking out to the June series of options, call traders are heavily focused on the $4 and $5 strikes, which sport OI of 9,859 contracts and 8,821 contracts, respectively.

Finally, there is some rather unusual options activity at the June 10 strike for MNKD. Specifically, both the June 10 call and put sport open interest of just more than 24,100 contracts. While these contracts appear to be part of a larger strategy, without additional information, the trader’s intent is difficult to discern.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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