Option Traders Bet on Sirius (SIRI)

01/29/2010 12:01 am EST

Focus: OPTIONS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Option activity has ballooned to five times the usual level today on Sirius XM Radio Inc. (SIRI), and traders are showing a distinct bias toward calls over puts on this low-priced security. So far, roughly 13,000 of these bullishly oriented bets have crossed the tape, compared to SIRI's expected call volume of fewer than 1,000 contracts.

SIRI price chartThe center of attention in today's session is SIRI's June 10 call, where 6,518 contracts have crossed the tape. About 91% of these calls have changed hands at the ask price, suggesting they were purchased, and implied volatility on this back-month option is up 4.4% as a result.

The stock's 1-strike call is already home to peak call open interest in the June series, with an impressive accumulation of 30,725 contracts in residence. However, judging by the flow of today's trading, we could see open interest on this option climb even higher overnight.

From a technical perspective, shares of the penny stock are actually faring quite well (relatively speaking). SIRI has marched higher along the support of its ten- and 20-week moving averages since February 2009, and the shares jumped today to a fresh 52-week peak of 81 cents.


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By Elizabeth Harrow of Schaeffer’s Trading Floor Blog

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