VALE and MU option traders are watching key technical levels
The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Stocks highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are mining stock Vale SA (ADR) (NYSE:VALE) and semiconductor stock Micron Technology, Inc. (NASDAQ:MU). Here's a quick look at how options traders have been approaching VALE and MU shares.
Vale Traders Target Puts Ahead of Earnings
VALE is trading higher, up 9.3% at $11.43 -- a two-year high -- on rumors that non-government shareholders are lobbying for CEO Murilo Ferreira to stay on with the mining company for up to another two years. The mining stock already boasts a strong technical performance, up 334% year-over-year, with its 20- and 50-day moving averages containing most of the shares' pullbacks.
From an options perspective, VALE traders have been unusually put biased over the past several weeks, despite the stock's strong performance on the charts. VALE's 50-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits at an annual peak, with 2.69 puts bought to open for every call over the last 10 weeks.
VALE's top front-month option is the February 10 put, many of which were bought to open on Feb. 9, when VALE shares peaked right at the $10 mark, suggesting traders were anticipating a rejection at double-digit territory. Recent buyers of out-of-the-money puts, however, may be shareholders seeking an options hedge ahead of Vale's earnings report next week. Whatever the motive, VALE's Schaeffer's Volatility Scorecard (SVS) of 99 indicates the shares have typically exceeded options traders' volatility expectations over the last 12 months.
Elsewhere, short interest is down 25% in the last reporting period, but more than 77 million VALE shares remain shorted. If short sellers continue to cover their positions, it could fuel VALE's journey higher. In addition, 60% of analysts weighing in rate the shares a tepid "hold." A round of upgrades could also be a catalyst for Vale SA (ADR) (NYSE:VALE).
Option Bulls Focus On Micron Technology
MU is down 0.7% at $23.89 so far today, amid reports the company is looking to unload its NOR flash memory business. Still, the stock is up more than 140% year-over-year, recently led higher by its 30-day moving average. Earlier this month, the shares managed a nab a new annual high of $25.31 before pulling back. The $25 neighborhood acted as a significant level in 2015; in June of that year, the shares managed to close above $25 for four days in a row before gapping lower, and a rally attempt over the next few days died at the $24.97 mark. While the shares have attempted to conquer this level several times in recent sessions, MU has yet to notch a close above the quarter-century mark.
Drilling down, it looks like options traders are keeping an eye on this key level, with the April 25 call currently MU's top open interest position, with more than 35,000 contracts outstanding. Bulls have been zeroing in on MU over the last two weeks, with MU's 10-day call/put volume ratio at the ISE/CBOE/PHLX showing 4.75 calls bought to open for every put, a reading that sits in the 77th percentile of its annual range.
Near-term option buyers are getting quite the bargain on Micron Technology, Inc. (NASDAQ:MU), with MU's Schaeffer's Volatility Scorecard (SVI) of 32% sitting just 2 percentage points from an annual low. Meanwhile, MU's SVS of 72 suggests the chip stock has tended to surpass option players' volatility expectations over the past year.
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