News for Options Traders

Bullish sentiment seems to be approaching peak levels on bailed-out bank Citigroup Inc. (NYSE:C – 27.46), wireless services provider Clearwire Corporation (NASDAQ:CLWR – 1.39), and solar stock SunPower Corporation (NASDAQ:SPWR – 4.14), according to data from the major options exchanges. In recent weeks, traders have been scooping up calls on C, CLWR, and SPWR at an accelerated clip. Here’s a closer look at the latest trends in the options pits for these three hot stocks.

Beginning with C, speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 46,891 calls during the past five days, compared to just 17,333 puts. The resulting call/put volume ratio of 2.71 confirms that bullish bets have nearly tripled their bearish counterparts over this time frame.

In fact, C now sports a 10-day call/put volume ratio of 2.21, based on cumulative buy-to-open data from the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). This ratio ranks above 77% of comparable readings taken during the past year, pointing to an elevated preference for calls over puts in recent weeks.

C monthly price chartIn that same vein, the  put/call open interest ratio (SOIR) for C checks in at 0.84, in the 46th annual percentile. This tame reading indicates a relatively complacent attitude among short-term speculators.

Elsewhere, short interest accounts for a nearly negligible 1.8% of the security’s float. In other words, very few traders are betting against C. At the stock’s average daily trading volume, it would take less than two days for this slim accumulation of bearish bets to be repurchased.

This upbeat attitude toward C is a little surprising, considering the stock’s 52-week decline of 24.8%. For more than a year, the stock has been guided steadily lower by double-barreled resistance at its 10-month and 20-month moving averages.

Also on call buyers’ radar is CLWR, which unveiled a well-received quarterly earnings report just over a week ago. In the five sessions since that event, traders on the ISE and CBOE have bought to open 30,044 calls on CLWR — and zero puts.

Now, CLWR boasts a top-heavy 10-day ISE/CBOE/PHLX call/put volume ratio of 543.23, in the 95th annual percentile — just five percentage points from a bullish peak.

In fairness, CLWR is trading at just over $1 per share, so there aren’t a whole lot of viable put strikes in play. However, bears aren’t avoiding the stock entirely, as a lofty 21.6% of the equity’s float is dedicated to short interest. In light of this data, it’s possible that some of the recent CLWR call buyers are actually short sellers looking to hedge against a continued climb by the stock.

CLWR daily price chartIf shorts are nervous, it’s not for nothing. CLWR has extended last Friday’s positive momentum throughout the week, with the shares currently on pace to notch a daily victory atop their 80-day moving average for the first time since April 13. However, the stock is still sitting on a sizable year-to-date loss of 36.6%.

Meanwhile, traders on the ISE and CBOE have scooped up 1,776 calls on SPWR during the past five days, along with only 3 puts. This pushes the stock’s 10-day ISE/CBOE/PHLX call/put volume ratio up to 47.91. Not only does this ratio reveal that traders have purchased nearly 48 times more calls than puts over the past two weeks, it also ranks above 95% of other such readings taken during the past year.

Narrowing our focus to near-term options, SPWR’s SOIR of 0.33 indicates that calls triple puts among contracts expiring within three months. This SOIR arrives in the 10th percentile of its annual range, as speculative players have been more call-heavy on the shares just 10% of the time during the past year.

SPWR weekly price chartThis skew toward calls precedes the company’s upcoming turn in the earnings confessional, with SPWR slated to report its second-quarter results after the close on Wednesday, Aug. 8. Analysts are looking for a loss of 9 cents per share, narrower than the year-ago deficit of 19 cents per share. Looking back, SPWR has surpassed consensus bottom-line estimates in each of its past four earnings announcements.

Similar to CLWR, though, the uptick in call volume on SPWR could be the result of increased hedging by the shorts. Short interest accounts for 13.8% of the stock’s float, so there’s no shortage of bears who might be looking to acquire some event-related insurance.

The shorts don’t need to panic just yet, though. SPWR has swallowed a loss of 77% over the past year, and the stock is trading below familiar resistance at its 10-week and 20-week moving averages. This trendline duo hasn’t been toppled on a weekly closing basis since mid-March.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s