Options Pros Talk Put-Call Parity and More This rebroadcast of OICs webinar panel on Put-Call Parity...
These Stocks Are Getting No Respect
08/25/2009 12:24 pm EST
Elizabeth Harrow of Schaeffer's Research notes extreme bearish sentiment on Verisign and Southern Copper. Call buyers prefer Visa, she writes.
Verisign (Nasdaq: VRSN) announced this morning that it will sell its messaging business to Syniverse Holdings (NYSE: SVR) for $175 million in cash. The deal is subject to regulatory approval, as well as certain closing conditions.
"Even under challenging economic conditions, we have continued to execute on our divestiture strategy through aligning with buyers with complementary strengths," asserted Mark McLaughlin, VRSN's president and CEO.
The shares have stitched together a gain of 8.7% in 2009, and they're now attempting to establish a foothold above resistance at their ten-month moving average.
Option players have grown frustrated with VRSN's lackluster price action, as evidenced by the equity's inflated Schaeffer's put/call open interest ratio (SOIR). The SOIR arrived today at 3.91, with puts nearly quadrupling calls among short-term options. The current reading ranks higher than 100% of other such ratios taken during the past year, indicating that bearish sentiment is at peak levels among speculative investors.
Southern Copper Corporation (NYSE: PCU) was smacked with a downgrade this morning, as HSBC Securities lowered its rating on the stock from "neutral" to "underweight." The brokerage firm cited valuation as the impetus behind the downgrade, yet simultaneously raised its price target on PCU from $19.50 to $21.50.
PCU [has] pulled back from its recently tapped peak near $30 per share. The security has soared 81.4% year-to-date, and it's up more than 219% from its November 2008 nadir of $9.12.
Despite the stock's steady path higher, option traders have loaded up on bearish bets in recent weeks. PCU's 10-day International Securities Exchange put/call volume ratio weighs in at a skeptically skewed 2.83, which ranks fewer than two percentage points from an annual pessimistic peak.
Jefferies & Co. initiated coverage of Visa (NYSE: V) this morning with a "buy" rating and a price target of $80, representing a premium of 17.7% to the stock's closing price on Monday. Sector peer MasterCard (NYSE: MA) also scored a new "buy" recommendation, with Jefferies citing its belief that the two companies will benefit from a continued shift toward electronic payments, particularly in international markets.
V is up [modestly on the news], with the shares holding steady beneath resistance at $70. This round-number neighborhood has capped the stock's progress since early June. Not surprisingly, option players have honed in on this strike. V's September 70 call is home to peak front-month open interest of 11,826 contracts, suggesting that some traders expect the shares to topple this level in the short term. Unless the shares make some headway up the charts in short order, this accumulation of overhead calls could start to exert options-related pressure.
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