Looking at the Put/Call Ratio and Open Interest Together

02/24/2010 12:01 am EST

Focus: OPTIONS

Nick Perry

Equity Options Trader, Schaeffer's Investment Research

There is an interesting battle going on around MercadoLibre, Inc. (MELI). The stock gapped lower at the open yesterday, but then rebounded from the initial lows. A look to the sentiment profile shows a couple of interesting points.


Click to Enlarge

The most interesting point is that only three of eight analysts (38%) rank the stock with a buy rating. That seems like relatively low optimism when you consider the daily chart below. Even after the recent pullback, the stock was up more than 200% over last 52 weeks.

At one point, MercadoLibre was a heavily shorted stock, but short interest has been generally decreasing since last summer. As discussed a number of times, I am interested in these situations where short sellers relent, but analysts have yet to jump aboard.


Click to Enlarge

The Schaeffer's Put/Call Open Interest Ratio would seem to suggest optimism, but the open interest configuration shows that open interest is fairly light. In other words, I wouldn't be too concerned about that.

By Nick Perry of Schaeffer’s Trading Floor Blog

Related Articles on OPTIONS