Today's column includes a look at a rise in put trading on Texas
Instruments (
TXN
), while call volume jumped on Calpine (
CPN
) and PulteGroup (
PHM
). Each day,
3 Stocks to Watch
focuses on the stocks seeing heavy options trading and gives you a
unique insight into each stock's sentiment backdrop.
Calpine (
CPN
)
Call trading was brisk on the shares of Calpine (
CPN
) on Monday, as more than 11,000 contracts crossed the tape. This
surge in volume was more than 12 times the stock's average daily
call trading volume, according to WhatsTrading.com. Furthermore,
roughly 83% of the volume changed hands at the ask price,
indicating that most of these contracts were purchased.
Options players are extremely optimistic when it comes to CPN.
The Schaeffer's put/call open interest ratio (SOIR) for CPN comes
in at 0.11, as call open interest easily outnumbers put open
interest among options slated to expire in less than three months.
This ratio of puts to calls is lower than 99% of all those taken
during the past year. In other words, short-term options players
have been more optimistically aligned toward the shares only 1% of
the time during the past 12 months.
Even Wall Street is smitten with the shares. According to
Zacks
, the stock has earned 10 "buy" ratings and six "holds." This
configuration still leaves room for optimism to continue to grow
toward the security.
Finally, there is one group that is skeptical of CPN. Short
sellers have loaded up on bearish bets toward the stock. During the
past month, the number of CPN shares sold short increased by 4% to
25 million. This accumulation of pessimistic positions accounts for
more than 8% of the company's total float. In light of this data,
it's possible that the rise in call trading on CPN could be related
to increased hedging by the shorts.
Technically speaking, the shares of CPN are up more than 9%
since the beginning of 2011. The stock has gained ground along the
support of its rising 10-week moving average recently and could
pressure the short sellers into closing their bearish bets,
resulting in a fresh wave of buying power.
PulteGroup
PutleGroup (
PHM
) was home to some heavy call trading on Monday, as more than 9,000
contracts crossed the tape. This surge in volume was more than
double the stock's average daily call trading volume, according to
data from WhatsTrading.com. In addition, approximately 78% of these
calls changed hands at the ask price, indicating that they were
purchased.
This surge in call volume runs counter to the trend seen on the
International Securities Exchange (ISE), where puts have run
rampant. During the past 10 trading days, 1.8 puts have changed
hands for every call purchased to open. This ratio of puts to calls
is higher than 76% of all those taken during the past 52 weeks,
pointing to a growing pessimism.
In fact, PHM's ISE and Chicago Board Options Exchange (
CBOE
) 10-day put/call volume ratio comes in at 1.56, which is higher
than 84% of all those taken during the past 12 months.
Despite the rise in put trading, there is still ample room for
pessimism to grow. The SOIR for PHM comes in at 0.64, as call open
interest nearly doubles put open interest among options slated to
expire in less than three months. This ratio of puts to calls is
lower than 79% of all those taken during the past year. In other
words, short-term options players have been more optimistically
aligned toward the shares only 21% of the time during the past 12
months.
Meanwhile, analysts are bearishly biased, as 14 of the 15
brokers following the company rate it a "hold," according to
Zacks
.
From a technical perspective, PHM appears to be in some trouble.
After a nice run higher along the support of its 10-day moving
average, the shares have broken below this trendline and turned
lower. The stock is now consolidating between $7.40 and $7.80.
Texas Instruments (
TXN
)
Puts were the name of the game for Texas Instruments (
TXN
) on Monday, as more than 20,800 contracts crossed the tape. This
surge in activity was more than double the stock's average daily
put volume, according to data from WhatsTrading.com.
The ISE has also witnessed a jump in put trading. During the
past two trading weeks, 1.5 puts have been purchased to open for
every one call. This ratio of puts to calls is higher than 60% of
all those taken during the past 52 weeks.
Furthermore, the SOIR for TXN comes in at 1.42, as put open
interest outnumbers call open interest among options slated to
expire in less than three months. This ratio of puts to calls is at
an annual peak, indicating that traders have not been more
pessimistically aligned toward the shares at any other time during
the past 12 months.
Even Wall Street has a slight bearish bias toward the shares.
According to
Zacks
, the stock has earned 15 "buy" ratings, 16 "holds," and three
"sells."
Technically speaking, the shares of TXN are charging steadily
higher along the steadfast support of their 10-week moving average.
The security has not logged a weekly finish below this trendline
since mid-September. A continuation of this trend could squeeze the
bears into buying back their pessimistic positions, pressuring the
stock higher.
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