My, how times have changed.
The once beleaguered oil-services stocks are rallying and attracting call buyers -- in size, as the traders say. And a giant of 1999,
, is seeing an options tape brimming with bearishness.
Floor traders say many trading desks are expecting analysts' outlooks on Qualcomm to turn gloomy in the very near future, and reported "massive" put-options buying on the telecom giant this morning.
With the stock down more than 6 to around 74, more than 2,600 of its out-of-the-money June 70 puts traded, jumping 9/16 ($56.25) to 1 5/16 ($131.25) by midday. Further down the options chain, more than 2,000 July 65 puts traded, running the price 1 3/8 ($137.50) to 4 1/8 ($412.50).
Put buyers pay for the right to sell a stock at a preset price by a specific date. In this case, the June options expire Friday and the July contracts on the third Friday of that month. Today's put-buying shows investors think there may be more weakness in the stock price.
On the other side of the sentiment scale, the idea of playing potentially higher oil prices through the summer was growing popular with options traders targeting the
Philadelphia Stock Exchange Oil Services Index
scheduled to meet next week to discuss its output level, oil-price speculation has been rampant. That, naturally, seeps into the Philly's OSX, made up of the key drilling and oil-services companies such as
Today, with the OSX up more than 2.2% to 124.69, traders were buying call options that would appreciate as the OSX continued to rise. Most popular were the September 140 calls, which traded more than 6,000 contracts for 9 5/8 ($962.50) halfway through today's trading. The volume caught the eye of many traders because it came against slight open interest of just 180 contracts.
The June 125 calls were also busier than usual, posting midday volume of 1,000 contracts but showing no significant price appreciation off of the traffic. The option was trading for 2 ($200) at around noon.
Traders said a major institutional buyer had jumped for the September 140 calls, an apparent bet that the OSX would continue to rise as seasonal demand in the U.S. kept gasoline prices high, regardless of any OPEC output adjustment.
Longer-dated options are more expensive, which makes them more speculative, especially in the wake of the rally some of the oil services stocks have already had. The OSX has already risen more than 50% this year.
options strategist Jay Shartsis said the OSX action was a bit of an aberration but that there was "big interest in its underlying stocks. Those are large-capitalization stocks and investors feel comfortable," he said.
In the overall market, Shartsis said increased put-buying in the past week is reflecting a healthy concern in the market. Options traders and strategists often see heavy put-buying as an indication that market weakness is at the end of a cycle, thus making it a bullish indicator.
While there hasn't been much put-buying action Wednesday, Shartsis said the past week provided "enough that there's a floor under the market."