3 Stocks to Watch: MBIA Inc., Savient Pharmaceuticals, and Waste Management

By
A A A

Today's column includes a look at a rise in call trading on MBIA Inc. ( MBI ), Savient Pharmaceuticals ( SVNT ) and Waste Management ( WM ). 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.

MBIA ( MBI )

Options players jumped on the shares of MBIA Inc. ( MBI ) on Friday, as more than 23,400 contracts changed hands. This surge in volume was double the stock's average daily trading volume of 10,788 contracts, according to data from WhatsTrading.com. In addition, options players were feeling optimistic, as 77% of the volume changed hands on the call side.

This surge in call volume runs counter to the recent trend seen on the International Securities Exchange (ISE), where MBI puts have traded at an accelerated clip. The stock's 10-day ISE put/call volume ratio comes in at 0.64, which is higher than 74% of all those taken during the past year.

However, the equity's Schaeffer's put/call open interest ratio (SOIR) suggests that most near-term traders remain in the bulls' camp. The ratio comes in at 0.33, as call open interest triples put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than 89% of all the readings taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 11% of the time during the past 12 months.

Short sellers are starting to unload their bearish bets. During the past month, the number of MBI shares sold short dropped by 10% to 17.6 million. However, this accumulation of pessimistic positions still accounts for 11.9% of the company's float, and is 4.2 times the stock's average daily trading volume. A continued unwinding of these shares could add some lift to the security.

Technically speaking, the shares of MBI finished 2010 with a bang, as the security gained more than 200% on the year. The equity has been in a steady uptrend since finding support near 3.50 in November 2009. Since tagging that low, the stock has created a series of higher highs and higher lows.

 WEEKLY CHART OF MBI SINCE NOVEMBER 2009

Savient Pharmaceuticals ( SVNT )

Savient Pharmaceuticals Inc. ( SVNT ) also popular in the options pits on Friday, as more than 25,400 contracts crossed the tape. This jump in volume was more than three times the stock's average daily trading volume of 6,634 contracts, according to data from WhatsTrading.com. Furthermore, roughly 64% of the volume crossed the tape on the call side.

Call trading has been on the rise on the ISE. During the past 10 trading sessions, 6.4 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 71% of all those taken during the past year, indicating a rising optimism.

On the other hand, the SOIR for SVNT remains somewhat bearishly biased. The ratio comes in at 0.74, which is higher than 61% of all those taken during the past year. In other words, short-term options speculators have been more pessimistically aligned toward the shares only 39% of the time during the past 12 months.

Elsewhere, we find that short interest is on the rise toward the shares. During the most recent reporting period, the number of SVNT shares sold short increased by nearly 14% to 13.6 million. This accumulation of pessimistic positions accounts for 21% of the company's total float, and is eight times the stock's average daily trading volume. Should the bears continue to increase their pessimistic positions, it could push the stock lower.

The only group that is definitively optimistic toward the shares is the analyst crowd. According to Zacks , the stock has earned eight "strong buys," three "holds," and one "sell." This configuration leaves ample room for potential downgrades if the stock continues to underperform.

From a technical perspective, the shares of SVNT didn't exactly finish 2010 in fine form, as the stock dropped more than 18% for the year. The equity is currently trapped in a sideways trading channel between support at the 11 level and resistance at the 13 level. In addition, the stock is facing overhead resistance from its 10-week moving average.

 WEEKLY CHART OF SVNT SINCE NOVEMBER 2009 WITH 10-WEEK MOVING AVERAGE

Waste Management ( WM )

Call buying was brisk on Waste Management Inc. ( WM ) on Friday, as more than 7,500 call contracts changed hands. This volume was approximately 5.8 times the stock's average daily call volume, according to WhatsTrading.com. In addition, 76% of the calls changed hands at the ask price, indicating that most of these contracts were purchased.

The ISE has seen a jump in call trading recently. During the past two trading weeks, 13.5 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 93% of all those taken during the past 52 weeks.

In addition, the ISE and Chicago Board Options Exchange ( CBOE ) reported that 5.3 WM calls have been purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 74% of all those taken during the past year.

Furthermore, the security's SOIR comes in at 0.45, as call open interest doubles put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than more than half of the readings taken during the past 12 months, indicating a bullish bias.

Short sellers have started to unload their pessimistic positions. During the past month, the number of WM shares sold short dropped by 2% to 32.8 million. This accumulation of pessimistic positions still accounts for 7.4% of the company's float, and is 10 times the stock's average daily trading volume. A continued unwinding of these bearish bets could add some lift to the shares.

Technically speaking, the shares of WM put in a decent performance in 2010, as the stock added 9%. The security is currently in an uptrend supported by its 10-week and 20-week moving averages.

 WEEKLY CHART OF WM SINCE FEBRUARY 2009 WITH 10-WEEK AND 20-WEEK MOVING AVERAGES



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.

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.


This article appears in: Investing , Options

Referenced Stocks: CBOE , MBI , SVNT , WM

Schaeffer's Investment Research

Schaeffer's Investment Research
  • See all for Schaeffer's Investment Research
  • View Print Version

More from Schaeffer's Investment Research:

Related Videos

Stocks

Referenced

Most Active by Volume

88,363,013
  • $102.47 ▲ 2.72%
76,664,591
  • $16.60 ▲ 2.09%
75,156,840
  • $13.20 ▼ 5.71%
53,255,668
  • $40.68 ▼ 6.03%
49,564,657
  • $96.87 ▲ 2.63%
42,649,404
  • $9.26 ▲ 1.09%
37,436,329
  • $31.19 ▲ 5.05%
35,538,826
  • $28.28 ▲ 1.25%
As of 10/21/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com