Today's column includes a look at a rise in call trading on
Arena Pharmaceuticals (
) and Boeing (
), while put trading increased on InterMune (
). 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.
Arena Pharmaceuticals (
Options trading was brisk on Arena Pharmaceuticals Inc. (
) on Monday, as more than 38,300 contracts crossed the tape. This
surge in volume was more than 15 times the stock's average daily
trading volume of 2,534 contracts, according to data from
WhatsTrading.com. In addition, traders were feeling bullish, as 88%
of the volume changed hands on the call side.
Calls have been a growing favorite on the International
Securities Exchange (ISE). During the past two trading weeks, 45.6
calls have been purchased to open for every one put purchased to
open. This ratio of calls to puts is higher than 94% of all those
taken during the past year, pointing to a growing optimism.
Meanwhile, the Schaeffer's put/call open interest ratio (SOIR)
is firmly in the bulls' camp. The ratio sits at 0.27, as call open
interest nearly quadruples put open interest among options slated
to expire in less than three months. This ratio of puts to calls is
lower than 92% of all those taken during the past year. In other
words, short-term options player have been more optimistically
aligned toward the shares only 8% of the time during the past 12
On the other hand, not everyone has jumped on the stock's
bandwagon. According to
, the stock has earned 13 "hold" ratings, five "sells," and not a
single "buy" rating.
Meanwhile, short interest sits at a lofty 34.7 million shares.
This accumulation of pessimistic positions accounts for nearly 29%
of the stock's total float and is 11 times its average daily
trading volume. Traders may be using some of the aforementioned
calls to protect their bearish bets in the event that the security
ARNA is facing some issues on the fundamental front. A recent
class action lawsuit charges that the company did not disclose
problems with a planned obesity drug. However, ARNA also has begun
testing another drug to treat a rare form of hypertension.
Technically speaking, the shares of ARNA are down more than 32%
since the beginning of the year. Following a lengthy consolidation
along the 1.50 level under resistance at its 10-day and 20-day
moving averages, the shares have shot sharply higher, breaking
The Boeing Co. (
) is expected to announce further delays with its troubled 787
Dreamliner program, it was reported Monday. BA was the center of
some brisk options trading yesterday, as more than 35,900 contracts
crossed the tape. This surge in volume was more than double the
stock's average daily trading volume of 16,480 contracts, according
to data from WhatsTrading.com. What's more, approximately 55% of
the volume changed hands on the call side.
Calls are a growing favorite on the ISE when it comes to BA.
During the past 10 trading sessions, 2.3 calls have been purchased
to open for every one put purchased to open. This ratio of calls to
puts is higher than 97.6% of all those taken during the past year,
indicating a growing optimism.
There is ample room for optimism to grow when it comes to the
stock's SOIR. The ratio comes in at 1.40, as put open interest
outnumbers call open interest among options slated for expiration
in less than three months. This ratio is also higher than 73% of
all those taken during the past year. In other words, short-term
options players have been more pessimistically aligned toward the
shares only 27% of the time during the past 52 weeks. A shift
toward the bulls' camp among options players could create fresh
buying pressure for the shares.
Elsewhere, we find that Wall Street remains a stalwart supporter
of the company. According to
, the stock has earned 19 "buy" ratings and five "holds."
From a technical perspective, the shares of BA are up more than
16% since the beginning of the year. Following the stock's sharp
rally from its March 2009 low to its April 2010 high, the security
has fallen into a sideways channel between support at the 60 level
and resistance in the 72 area.
Options players were smitten with InterMune Inc. (
) on Monday, as more than 48,500 contracts changed hands. This
surge in volume was more than five times the stock's average daily
trading volume of 9,336 contracts, according to WhatsTrading.com.
Furthermore, approximately 61% of the volume crossed the tape on
the put side.
Options trading data reveals a slight bearish bias in the ITMN
sentiment picture. Put trading is growing in popularity on the ISE
and Chicago Board Options Exchange (
). The 10-day put/call volume ratio comes in at 0.40, which is
higher than 57% of the readings taken during the past 52 weeks.
What's more, the SOIR for ITMN comes in at 0.76, which is higher
than 61% of all the readings taken during the past 52 weeks. In
other words, short-term options players have been more
pessimistically aligned toward the shares 39% of the time during
the past 12 months.
Although short interest dropped by 11% during the past month,
more than 5.1 million ITMN shares remain sold short. This
accumulation of bearish bets accounts for 13.4% of the company's
float and is 8.3 times the stock's average daily trading volume. An
unwinding of these positions could fuel a significant rally in the
Finally, Wall Street has its doubts about the firm. According to
, the stock has earned five "strong buy" ratings, seven "holds,"
and one "sell."
The shares of ITMN have been extremely volatile in 2010, trading
as high as $48 and as low as $9. Technically speaking, the shares
of ITMN are up more than 174% for the year. The stock shot higher
last Friday following news that a European medicines regulator gave
a positive opinion on a treatment for idiopathic pulmonary
fibrosis, a fatal condition. The stock is now trading well above
its 10-day and 20-day moving averages.
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