Call Buying Reveals High Hopes for SanDisk Corporation Ahead of Earnings

04/21/2009 10:46 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

Optimism is on the rise among option traders as SanDisk Corporation (SNDK) prepares for its upcoming turn in the earnings spotlight. The company is scheduled to unveil its first quarter results today, April 21, and calls are the option of choice ahead of the event.

On Friday, traders on the International Securities Exchange (ISE) bought to open 4,642 calls on SNDK, compared to just 532 puts. The stock's single-day call/put ratio was a seriously skewed 8.73, as bullish bets were nearly nine times more popular than their bearish counterparts.

SNDK price chartIn keeping with this upbeat theme, SNDK sports an ISE ten-day call/put volume ratio of 4.57. This ratio ranks higher than 59% of other such readings taken during the past year, which points to growing demand for the security's calls.

In the front-month series, peak call open interest of 7,699 contracts rests at the 13 strike. Another notable accumulation of 6,767 contracts lies at the May 15 call. With SNDK trading at $13.63 at last check, the former option is at the money, while the latter is out of the money.

Meanwhile, the most active call option in today's trading is in the newly active June series. The June 14 call has seen 1,954 contracts cross the tape on open interest of zero, indicating that all of today's volume consists of newly opened positions.

This rising call volume indicates that speculative investors have high hopes for SNDK's upcoming earnings report. Analysts are currently expecting the company to report a quarterly loss of 76 cents per share, down sharply from a profit of 21 cents per share in the same period last year.

On the charts, SNDK is currently resting on newfound support from its rising 20-day moving average. Thanks to its year-to-date rally of 54.4%, the shares are now perched atop resistance from their ten-month moving average. However, the security's momentum has waned near the 15 level, which hasn't been toppled on a weekly closing basis since October 2008.

By Elizabeth Harrow of Schaeffer’s Trading Floor Blog


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