Option Traders Dive in to Two Stocks in the News

08/17/2010 12:01 am EST

Focus: OPTIONS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Speculative investors have set their sights on Barclays PLC (BCS) and GT Solar International, Inc. (SOLR). While the banking issue is attracting attention on reports of BlackRock (BLK)-related losses, SOLR is scoring heavy call volume as it bolts higher on the charts.

Puts are in heavy rotation on BCS, with volume rising to 15 times the norm so far. Roughly 5,831 puts have changed hands on the banking issue, compared to just 191 calls. The day's most active strike is the BCS September 17.50 put, where 5,607 contracts have traded. Implied volatility on this option has climbed 1.7 percentage points as a result of the increased activity.


Figure 1
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This flurry of put trading coincides with a 1.2% climb in the shares, with the stock shrugging off a Wall Street Journal report that Barclays could swallow additional losses on its investment in BlackRock. BCS is now trading around $20—placing those 17.50-strike puts out of the money. However, the stock hasn't yet mustered enough positive momentum to tackle its looming 32-month moving average, which hasn't been conquered on a monthly closing basis since October 2007.

As for SOLR, call volume has surged to 23 times the expected level, with more than 2,000 contracts changing hands. Most of the activity has been centered on SOLR's December 10 call, where 1,211 contracts have crossed the tape—59% at the ask price, revealing a bias toward buying activity. With just 357 contracts in open interest at this strike, it's a safe bet that new calls are being opened here today.


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No news in particular seems to have sparked SOLR's flood of call activity, but the shares tagged a new annual high of $8.58 earlier today. The stock is up more than 6% this afternoon, which could have shorts scrambling to cover; no less than 14.5% of SOLR's float has been sold short. In fact, today's uptick in call buying could be related to increased hedging activity by anxious bears.

By Elizabeth Harrow, contributor, Schaeffer’s Trading Floor Blog

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