There were 1,203 unusually active options in Wednesday's trading split, 61%/39% in favor of the calls. Three of the 737 calls with Volume/OI ratios of 1.24 or higher, expiring in a week or later, were greater than 100.
More importantly, based on their ask prices, all three totaled $126. Interestingly, their daily options volumes were multiples of their 30-day averages.
On the surface, the trio aren’t all necessarily screaming buys, but there’s a reason for the high Vol/OI ratios. I’m going to consider what those reasons might be.
By the end, I’ll decide how many of the three stocks and call options are worth betting on.
Wendy’s (WEN)
The quick-service restaurant (QSR) chain had a total options volume of 138,750 on Wednesday, 14.6x its 30-day average. Its put/call volume ratio was 0.87, which is bullish. However, the Barchart Technical Opinion is a Strong Sell at the moment.
Why was someone buying Wendy's (WEN) call options yesterday?
Although there were plenty of trades with 10 call contracts or more for the May 16 $16 strike, 69,500 took place in one trade at 3:30 yesterday afternoon with an ask price of $0.60, less than the $0.70 close. That’s an outlay of $4.17 million, or 3.9% of its $15.51 closing price.
While a $4 million bet is a lot for average punters like myself, it's chump change for a big hedge fund or institutional investment manager. If they exercise the cause at expiration in 86 days, they’ll have to cough up $111.2 million.
The trade is self-explanatory. It's got an ITM probability at the expiration of nearly 42%. It only needs to appreciate by $1.09 (7.0%) over the next three months. I say only, partly in jest, because WEN stock is down nearly 15% and 36% over the past year and five-year periods. It’s not what you’d call a momentum play.
What it does have going for it is a delta of 0.43522. You can generate a 50% return on your money by selling before expiry if it appreciates by 69 cents (4.4%). Equally important, your net debit if you’re the big buyer is just $60 per contract. It’s not a huge loss if things go south.
Another reason someone might have bought this particular call yesterday is that Wendy's reported better-than-expected Q4 2024 results on Feb. 13. These included same-restaurant sales growth of 4.3% in the quarter and $0.25 earnings per share, a penny better than Wall Street’s expectations.
As for the year, it delivered its 14th consecutive increase in same-restaurant sales growth and a 3.1% increase in EPS to $1.00. It trades at just 15.5x those earnings. Chipotle Mexican Grill trades at 47x its trailing 12 months EPS.
Wendy’s is an interesting contrarian value play.
Verizon Communications (VZ)
The Barchart Technical Opinion is a Weak Buy. Verizon (VZ) is the most conservative bet of the three stocks. It currently has a 6.4% dividend yield, which is very attractive if you are a dividend-focused investor.
However, of the three big U.S. wireless carriers, T-Mobile (TMUS) is the one I favor, although AT&T (T) is writing the ship after years in the wilderness due to its media debacle. I recommended T stock and options in January 2024. It's up 60% since.
In 2025, all three are up year-to-date, with Verizon trailing the pack considerably.
The Motley Fool recently pointed out that Verizon stock trades at a much lower multiple to forward earnings (8.7x) compared to AT&T (12.2x) and T-Mobile (25.4x). Combine that with a consistent dividend and it becomes a value play worth considering.
The Feb. 28 $42.50 call had the lowest ask price of the three yesterday at $0.21, or 0.5% of its $42.01 closing share price. Given higher food prices, etc., you can’t feed your family on $21, so it’s a no-brainer from a cost standpoint.
However, with only nine days to expiration, your work has been cut out for you. The ITM probability is just 33.75%. However, you can double your money by selling before expiration if the price appreciates by 67 cents (1.6%). Up 4% in the past five days, it’s achievable at a low cost.
This particular call makes a lot of sense if you want to own Verizon for the long term.
Healthpeak Properties (DOC)
The last of the trio of stocks, Healthpeak Properties (DOC), is a Strong Sell, according to the Barchart Technical Indicator. On the plus side, the stock is quite popular with analysts. Of the 19 analysts covering it, 14 rate it a Buy (4.37 out of 5) with a target price of $24.62, 25% higher than where it currently trades.
Healthpeak’s dividend yield is almost as impressive as Verizon’s at 6.2%, just 20 basis points lower. It should certainly be on your radar if you’re income-focused.
The REIT owns 700 healthcare properties across three core property types: outpatient medical, lab, and continuing care retirement communities (CCRC). In 2024, its adjusted FFO (funds from operations) was $1.81. It expects an adjusted FFO of $1.84 in 2025, 2% higher than this past year.
This past year was a big one for the REIT.
It completed its merger with Physicians Realty Trust, paying $2.64 billion in stock to acquire 299 outpatient medical buildings. Healthpeak sold some of them to rightsize the merged entity. Post-merger, Healthpeak shareholders owned 77%, with Physicians’ shareholders owning the rest.
It’s now a significant player in healthcare real estate.
The March 21 $20 call had an ask price of $0.35, just 1.8% of Healthpeak’s Wednesday closing price of $19.50. It has to appreciate by 4.4% over the next 30 days for you to consider exercising your right to buy 100 shares. It only has to appreciate by 2.5% for you to generate a 50% return by selling your call. That’s a 600% annualized return.
I’ll take it.
Healthpeak is worth holding for the long haul because of its healthcare exposure. The sector’s not going away.
