Call Trading Increases on These Two Stocks

01/06/2010 12:01 am EST

Focus: OPTIONS

Jocelynn Drake

Financial Analyst, Schaeffer's Investment Research

Weatherford International (WFT) was the focus of some brisk options trading on Monday, as more than 53,600 contracts changed hands. This volume was 3.3 times the equity's average daily trading volume of 16,196 contracts, according to data from WhatsTrading.com. In addition, roughly 72% of the volume changed hands on the call side.

Looking at the action in the front three months of options, we find that the January 15 put added approximately 4,000 new positions, while the February 20 call added roughly 1,600 new positions.


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Overall, call trading remains popular among traders. The International Securities Exchange (ISE) has reported more than three calls purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 73% of all those taken during the past year. In addition, the ISE/Chicago Board Options Exchange (CBOE) ten-day call/put volume ratio comes in at 4.22, and is higher than 80% of all those taken during the past year.

Meanwhile, the Schaeffer's put/call open interest ratio comes in at 0.44, as call open interest more than doubles put open interest among options slated to expire in less than three months. This put/call ratio is lower than 75% of all those taken during the past year. In other words, short-term options speculators have been more bullishly aligned toward the shares only 25% of the time during the past year.

Options traders jumped on Rambus (RMBS) options on Monday, as more than 86,300 contracts changed hands. This surge in volume was more than three times the equity's average single-session trading volume of 25,468 contracts, according to data from WhatsTrading.com. In addition, we find that roughly 66% of the volume changed hands on the call side.


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In fact, the January 30 call was one of the most active options in the front three months of trading, with more than 3,600 new positions being added. Furthermore, the February 30 call added approximately 2,500 new positions. Finally, the January 20 put increased its open interest by 1,800 contracts.

Meanwhile, options players are still on the pessimistic end of the sentiment spectrum. The Schaeffer's put/call open interest ratio for RMBS stands at 0.55, which is higher than 91% of all those taken during the past year. In other words, short-term options speculators have been more bearishly aligned toward the shares only 9% of the time during the past 12 months.

However, call trading is on the rise on the International Securities Exchange (ISE). During the past ten trading sessions, three calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 59% of all those taken during the past year.

Elsewhere, we find that short sellers remain heavily bearish, as more than 11% of the company's total float has been sold short. An unwinding of these positions could fuel a rally in the shares.

By Jocelynn Drake of Schaeffer’s Daily Option Blog

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