The major market indices are perched on a slight gain heading into the week’s final stretch, hinting that an end to the recent three-week-long skid may be in sight. Optimism returned to the options pits, with the CBOE put/call volume ratio plunging to 0.59, its second lowest reading of the month, moderating to 0.65.
As we close out the week, we’ll take a look at some of the most active stocks in the options pits — namely, Tesla Motors Inc (NASDAQ:TSLA), Chesapeake Energy Corporation (NYSE:CHK), and American Airlines Group Inc (NASDAQ:AAL).
Tesla Motors Inc. (TSLA)
Tesla Motors was once again a hot topic on Wall Street yesterday. The news started off good, with New Jersey Gov. Chris Christie signing a bill that will lift the direct-sales ban on Tesla vehicles. However, sentiment turned sour after Virgin Group founder Sir Richard Branson told Bloomberg that he endorsed the idea of Virgin building an electric car and competing directly with Tesla “in the car business as we do in the space business.”
TSLA stock investors were already nervous ahead of yesterday’s news, but the potential for competition from Branson sent the stock down more than 2.5%. The reaction in the options pits was more positive, with 55% of the 190,937 contracts in volume trading on the call side. A closer look reveals that March options were the most popular on the session, which is not surprising given that this series expires at the close today.
While volume was below open interest at most strikes, the March $197.50 put saw 2,566 contracts trade on open interest of 2,199 contracts, hinting that new positions may have been initiated at this strike. In premarket trading, TSLA was up fractionally at $196.75.
Chesapeake Energy Corporation (CHK)
Oil and gas exploration firm Chesapeake Energy was the target of some withering analyst criticism on Thursday. Specifically, Sterne Agee downgraded CHK stock to “underperform” and cut its price target to $9 per share. Agee said the company has “questionable capital allocation” and that free cash flow was a definite concern.
With CHK stock already languishing under the weight of a stronger U.S. dollar and plunging energy prices, traders send the stock plunging nearly 4.5% lower on the day. Following suit, options traders piled into CHK stock puts to the tune of 72% of Thursday’s 117,724 contracts in volume.
The most popular strike on the session was the March $13.50 put, where 1,219 contracts traded on open interest of 59,089 contracts. In premarket trading, this strike was only a few cents out of the money.
American Airlines Group Inc. (AAL)
Ending on a positive note, American Airlines Group will be joining the S&P 500 Index after the close of trading today. AAL stock will replace Allergan Inc. (NYSE:AGN), which is being acquired by Actavis plc (NYSE:ACT). AAL investors cheered the move, sending the stock higher by nearly 2% during Thursday’s session.
Options traders were also feeling bullish, snatching up calls at a brisk pace. In fact, 78% of the 130,462 contracts trading on AAL stock crossed as calls. The majority of Thursday’s volume took place in the March series, and appears to be profit taking ahead of expiration. That said, some call buying activity appears to be slipping into the April series, with traders targeting the in-the-money April $55 call and the out-of-the-money $57.50 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
