Call Volume Climbs Ahead of Earnings from Alcatel-Lucent (ALU)

07/21/2009 12:01 am EST


Elizabeth Harrow

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

Call volume surged last Friday (July 17) on Alcatel-Lucent (ALU). During the course of the session, traders on the International Securities Exchange (ISE) bought to open 4,219 calls on ALU, compared to just one put.

ALU price chartOf course, with ALU trading near $2.50, it's natural that traders will favor calls over puts. Currently, the lowest available put strike for the stock is 2.50 itself. However, the bias toward bullish bets has rarely been greater. ALU sports a ten-day ISE call/put volume ratio of 619.73, which ranks just about two percentage points from a new annual high.

On Friday, the security's December 2.50 call was the center of attention, with 7,545 contracts trading on open interest of 6,781. Meanwhile, ALU's January 2010 2.50 call saw 3,555 contracts change hands on open interest of 5,381. All told, the stock's call volume on Friday ramped up to roughly nine times the norm.

Meanwhile, short interest on the shares vaulted higher by more than 28% during the most recent reporting period. With ALU slated to report quarterly earnings on July 30, some shorts might be hedging against a possible post-earnings rally by purchasing calls.

On the charts, the stock is currently struggling to maintain a foothold atop its ten-week moving average. This trend line, in conjunction with its 20-week counterpart, has provided sporadic support since late March.

By Elizabeth Harrow Schaeffer’s Trading Floor Blog

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