3 Stocks to Watch: American International Group, General Electric, and SanDisk

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Today's column includes a look at a rise in call trading on American International Group ( AIG ), General Electric ( GE ), and SanDisk ( SNDK ). Each day, 3 Stocks to Watch focuses on stocks seeing heavy options trading and gives you a unique insight into each stock's sentiment backdrop.

American International Group ( AIG )

Options traders flocked to American International Group Inc. ( AIG ) on Friday, as more than 127,700 contracts changed hands. This surge in volume was more than six times the stock's average daily trading volume of 19,898 contracts, according to data from WhatsTrading.com. In addition, traders were feeling optimistic, as 78% of the volume changed hands on the call side.

The International Securities Exchange (ISE) has seen an increase in call trading recently. During the past two trading weeks, 3.3 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 89% of all those taken during the past year, pointing to growing optimism.

Meanwhile, the Schaeffer's put/call open interest ratio (SOIR) has a slight slant to the bullish side. The ratio comes in at 1.00, which is lower than 57% of all those taken during the past 52 weeks. In other words, short-term options speculators have been more optimistically aligned only 43% of the time.

Elsewhere, we find that short sellers are starting to unload their bearish bets. During the past month, the number of AIG shares sold short dropped by 13.4% to 17.52 million. However, this accumulation of pessimistic positions still accounts for 13% of the company's total float and is 7.8 times the stock's average daily trading volume. If more of these bears drop out of the picture, it could help to fuel a continued rally in the shares.

Wall Street remains less than optimistic, as all four of the analysts following AIG rate it a "hold" or worse, according to Zacks .

Technically speaking, the shares of AIG are up more than 63% since the beginning of the year. The equity has climbed higher along its 20-week and 32-week moving averages since early March.

 WEEKLY CHART OF AIG SINCE FEBRUARY 2010 WITH 20-WEEK AND 32-WEEK MOVING AVERAGES

General Electric ( GE )

General Electric Co. ( GE ) has been lighting up the news ticker the last several days.

GE on Friday raised its dividend payment for the second time this year, lifting its quarterly payout to 14 cents a share from 12 cents, a 17% increase. That followed a 2-cent boost in July.

Then this morning, GE announced that it will buy Wellstream Holdings PLC for $1.3 billion. GE is offering 780 pence in cash and a special dividend of 6 pence in cash per Wellstream share. Wellstream's board intends to unanimously recommend shareholders accept the deal, which is expected to close in the first quarter of 2011, according to a statement from GE.

The security was the center of some heavy options trading on Friday, as more than 453,300 contracts changed hands. This surge in volume was more than four times the stock's average daily trading volume of 104,158 contracts, according to data from WhatsTrading.com. Meanwhile, 77% of the volume changed hands on the call side.

Options players have shown a preference for GE's calls on the ISE and Chicago Board Options Exchange ( CBOE ). During the past 10 trading sessions, 5.5 calls have been purchased to open for every one put purchased. This ratio of calls to puts is higher than 97% of all those taken during the past 52 weeks.

Furthermore, the SOIR for GE comes in at 0.91, which is lower than 73% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 27% of the time during the past 12 months.

Elsewhere, we find that Wall Street is still smitten with the shares. According to Zacks , the security has earned nine "buy" ratings and seven "holds."

From a technical perspective, the equity has added more than 17% since the beginning of 2010. After bouncing off its March 2009 lows, the stock has struggled with resistance at its 10-month and 20-month moving averages. However, GE recently climbed above both of these trendlines and is facing long-term resistance at the 20 level.

 MONTHLY CHART OF GE SINCE MAY 2008 WITH 10-MONTH AND 20-MONTH MOVING AVERAGES

SanDisk ( SNDK )

Options players jumped on the shares of SanDisk Corp. ( SNDK ) on Friday, as more than 72,400 contracts changed hands. This surge in volume was more than double the stock's average daily trading volume of 35,181 contracts, according to data from WhatsTrading.com. Furthermore, it appears that 67% of the volume changed hands on the call side.

Friday's preference for calls runs counter to the recent trend seen on the ISE, where puts have been a favorite. During the past 10 trading sessions, 1.2 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 85% of all those taken during the past 52 weeks.

Meanwhile, the SOIR for SNDK comes in at 0.97, which is higher than 88% of other such readings taken during the past year. In other words, short-term options speculators have been more skeptically aligned toward the shares only 12% of the time during the past 12 months.

Only Wall Street remains somewhat optimistic toward the shares. According to Zacks , the stock has earned 10 "buy" ratings, seven "holds," and two "strong sells."

Technically speaking, the shares of SNDK are up more than 71% since the beginning of the year. The equity has marched higher along the steadfast support of its 10-month moving average.

 MONTHLY CHART OF SNDK SINCE NOVEMBER 2008 WITH 10-MONTH MOVING AVERAGE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: AIG , CBOE , GE , SNDK

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