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GT Solar International (SOLR) Garners Bearish Attention in the Options Pits

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 12:03:33 PM

GT Solar International, Inc. (SOLR) succumbed to selling pressure on Monday, thanks to sector woes induced by fellow solar concern Yingli Green Energy (YGE). In light of the equity's retreat, put players pounced on SOLR, with single-session volume skyrocketing to almost 10 times the norm. More specifically, SOLR saw close to 1,000 puts cross the tape yesterday, compared to its average daily volume of roughly 100 contracts.

The deep-in-the-money March 12.50 put saw 600 contracts change hands � most of which traded at the ask price, implying they were likely bought. Plus, put open interest at the front-month strike increased by exactly 600 contracts overnight, confirming our suspicions of fresh pessimistic positions. What's more, the March 12.50 strike remains most popular today, with almost 1,200 contracts exchanged so far.

The recent affinity for SOLR puts is further echoed by the latest data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past two weeks, the stock has racked up a put/call volume ratio of 0.50, in the 85th annual percentile. In other words, traders on the ISE and CBOE have initiated bearish bets at a faster pace only 15% of the time during the past year.

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Call Players Predict Extended Rebound for Sohu.com Inc. (SOHU)

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 11:28:40 AM

Near-term call buyers swarmed Sohu.com Inc. (SOHU) on Monday, with single-session volume more than quadrupling the norm. More specifically, the Chinese Internet issue saw roughly 5,100 calls change hands, compared to its expected daily volume of fewer than 1,200 contracts.

Nearly all of the action centered on the stock's near-the-money March 55 strike, which saw almost 4,500 contracts cross the tape. The majority of the calls traded at the ask price, and call open interest at the front-month strike more than tripled overnight, hinting at buy-to-open activity. In fact, the 55 strike is now home to peak call open interest in the March series, with more than 5,800 contracts in residence.

By purchasing the March 55 calls, the buyers are betting the shares of SOHU will muscle past the $55 level by options expiration on Friday, March 19. At last check, the equity has added 1.7% to explore the $54.40 vicinity.

From a longer-term perspective, since grazing the $48 region in mid-February, the shares of SOHU have powered more than seven points higher, outpacing the broader S&P 500 Index (SPX) by 2% during the past 20 sessions. What's more, the stock is now poised to close the week atop its 20-week moving average for the first time since October 2009.

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Disappointing Earnings Stimulate Option Activity on H&R Block, Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 11:27:01 AM

Tax titan H&R Block, Inc. (HRB) filed its own return Monday, reporting its third-quarter earnings. Specifically, HRB reported per-share profits of 16 cents, a 20% decrease from the same year-ago period. Additionally, HRB refused to provide a full-year outlook, instead tersely warning that 2010 looked grim given the high unemployment levels.

Following Monday's report, option players flocked to the equity, driving volume to double HRB's daily average. Specifically, call volume soared to 5,454 contracts traded -- four times the equity's average daily call volume of 1,200.

The March 17 call received the most attention, with 3,931 contracts changing hands. Overnight, open interest at this strike grew by 2,881 contracts, pointing to the accumulation of fresh positions. What's more, 44% of these calls crossed the tape at the ask price, suggesting a portion of these calls were bought to open.

The International Securities Exchange (ISE) reports that over four calls have been bought to open for every one put during the past 10 trading sessions. This ratio ranks in the 78th annual percentile of readings taken in the past year.

Elsewhere on the street, short interest on HRB has spiked over 18% during the past month, and now accounts for 3.77% of the equity's total available float. Some of the recent call activity could be credited to bears hedging their short positions with calls.

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Option Player Runs a Long Put Spread on Dick's Sporting Goods, Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 10:44:50 AM

Option players rushed Dick's Sporting Goods, Inc. (DKS) Monday, spiking volume to 10 times the norm. Traders showed particular preference for puts, which traded 4,085 contracts -- 16 times DKS' average daily put volume.

Zeroing in on particular plays, it appears one bearish speculator opted to initiate a long put spread on DKS. This strategy is employed when a trader expects downward movement in the stock, but has a specific downside target in mind. In other words, the player is bearish, but not too bearish. The speculator purchases a put that's at the money (or barely in the money) and simultaneously sells a put that's deeply out of the money. By selling a put, the player is able to offset part of the cost of this play.

Yesterday, two blocks totaling 870 April 22.50 puts crossed the tape closer to the bid price than the ask. Overnight, open interest at this strike increased by 892 contracts, suggesting these puts were sold to open. At the same time, two symmetrical blocks totaling 870 April 25 puts traded closer to the ask price. With open interest at this strike growing by 1,119 positions overnight, it appears these puts were bought to open.

In this case, the trader believes DKS will plummet past the 25-strike by April expiration, rendering his purchased puts in the money. However, the trader doesn't want DKS to retreat so far that he risks assignment for the sold April 22.50 puts, and regrets not simply purchasing the April 25 puts.

DKS is currently perched at $25.85.

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Options Trading Jumps on Cypress Semiconductor (CY) Puts Despite Technical Strength

Jocelynn Drake (jdrake@sir-inc.com)

3/9/2010 9:27:55 AM

Cypress Semiconductor (CY) was the center of some brisk put option trading on Monday, as more than 19,300 put contracts crossed the tape. According to data from WhatsTrading.com, this volume was 11 times the stock's average daily put trading volume. In addition, only 25% of the volume changed hands at the ask price.

Options players are somewhat complacent toward the shares, as the Schaeffer's put/call open interest ratio comes in at 0.94, which is higher than only 41% of all those taken during the past year. This lower percentile rank points to a slightly bullish leaning among options players.

However, short sellers are skeptical of the shares. During the past month, the number of CY shares sold short increased by 8% to 17 million. This accumulation of bearish bets is four times the stock's average daily trading volume and accounts for nearly 12% of the company's total float. One thing to keep in mind is that a large portion of the existing call positions could be hedges against these shorted shares to protect them against an increase in the security.

Technically speaking, the stock has gained more than 14% since the beginning of 2010 along the support of its ascending 10-week moving average. The equity has suffered only one weekly finish below this intermediate-term trendline since late November.

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Commentary by WhatsTrading.com

Cisco Systems Inc (CSCO) $26.20 +0.27%

3/9/2010 11:00:03 AM

Cisco Systems (CSCO) calls are seeing active trading ahead of the company's 8:00 a.m. PT web cast. The networking company is expected to make a major product announcement, which might be new technology for wireless carriers. Shares are up 3 cents to $26.16 and 64K calls traded (28K puts). The total volume represents 7X the typical activity for the first hour of trading. March 26, March 27, and April 27 calls are the most actives. Implied volatility is up about 3.5 percent to 26, as players jockey for position ahead of the news.

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Daily Rundown, March 9

3/9/2010 10:20:03 AM

Stocks are indicated lower on weakness overseas and falling commodities prices Tuesday. Less than thirty minutes before the opening bell, stock index futures indicate that the Dow Jones Industrial Average might lose about 20 points at the open.\n
\nTrading was cautious overseas before the opening bell on Wall Street. While Asias equity markets finished mixed, benchmarks are broadly lower across Europe. UKs FTSE is down .7 percent, Frances CAC 40 lost .6 percent, and Germanys DAX slipped .6 percent.\n
\nWeakness in Europe comes as Greeces Prime Minister George Papandreou travels to Washington to meet with President Obama Tuesday. In a speech to the Brookings Institute Monday, Papandreou said his country has not requested a bailout, but hopes European support will ensure his debt ridden country can borrow from global financial markets.\n
\nMeanwhile, the euro is taking a hit, falling .0085 to 1.3546 against the buck. The dollar fell .52 to 89.76 against the Japanese yen.\n
\nWith no economic data to guide the market action, bonds are bid on the spreading problems in Europe and after China reiterated its commitment to buying Treasurys. The benchmark ten-year note is up 8/32nd and now yields 3.68 percent.\n
\nHowever, euro weakness is weighing on commodities. Crude oil lost $1.37 to $80.50 a barrel and gold fell $11.50 to $1112.50 an ounce.\n
\nAmong the stocks to watch Tuesday, Cisco (CSCO) moves into the spotlight at 11:00 eastern time. The networking company is expected to announce a new product that will forever change the internet, which is possibly a technology for wireless carriers.\n
\nTexas Instruments (TXN) is down 1.4 percent after the company offered in-line guidance in its mid-quarter update after the closing bell yesterday. TIVO slipped 1.5 percent, even after the company posted earnings and revenues that easily topped analyst estimates late Monday. H&R Block (HRB) is also lower on earnings. Navistar (NAV) and Collective Brands (PSS) might see some pre-earnings action ahead of earnings, due out after the closing bell. \n

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Unusual Activity Roundup, Mar 8

3/8/2010 4:19:35 PM

Some less actively traded names seeing bullish order flow: Iridum Comm (IRDM), General Growth Properties (GGP), Logitech (LOGI) Bearish order flow: Pinnacle Entertainment (PNK), Rehabcare Group (RHB), Wonder Auto (WATG) Post Earnings: Poniard Pharmaceuticals (PARD), Yingli Energy (YGE) Pre-Earnings: Kroger (KR), E-House Financial (EJ), H&R Block (HRB) Ex-div.: Home Depot (HD), CBS, Brinker (EAT), Allegheny Tech (ATI), Expedia (EXPE)

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Palm Inc (PALM) $5.74 +0.53%

3/8/2010 1:59:39 PM

PALM, which hit a new 52-week low of $5.4 this morning, has seen a 17 cent spike in the past few minutes and is now up a nickel to $5.76. Option volume is still on the light side, with 18K calls and 12K puts traded. Implied volatility in PALM has been moving higher for the past few weeks and is up another 2.5 percent to multi-week highs around 93.

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Research In Motion Ltd (RIMM) $72.90 +4.89%

3/8/2010 12:19:39 PM

Resarch in Motion (RIMM) is up $3.28 to $72.78, the best gainer in the NASDAQ 100, and heading to session highs in active trading. Shares opened higher after BMO raised the stock to Outperform from Market perform and upped the price target to $80 from $75. The stock has been able to build on the early momentum and, in the options, 57000 calls now traded, or about 4X the typical activity for the first 90 minutes of trading. March 70 and 75 calls are the most actives, with 19.4K and 17.4K traded, respectively. Implied volatility is moving as well, up about 8 percent to 37.

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Visa Inc (V) $90.48 +2.23%

3/8/2010 11:19:39 AM

Visa (V) touched a new 52-week high and was recently up $1.74 to $90.25 amid strength in the credit card names (MA is up $6.76 to $246.30). In the options, Visa is active. 11,000 calls and 5640 puts traded so far. The top trades have been lots of March 85 puts at the ask. March 90 calls are the most actives. There is no news on V or MA today, but implied volatility is up 1.5 percent to 23.75, as it appears that premium buyers are taking positions in anticipation of increasing volatility in Visa over the next two weeks.

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Cell Therapeutics Inc (CTIC) $1.12 +25.09%

3/8/2010 9:59:41 AM

Cell Therapeutics (CTIC) is up 22 cents to $1.12 per share and calls are active in early trading after the FDA completed a review of a new overseas plant that manufactures pixantrone and found the site in compliance. Shares are up and early action includes a sweep of 4000 Sep 5 calls at a nickel. Looks like an opening lottery ticket buyer.

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Unusual Activity Roundup, Mar 5

3/5/2010 3:59:55 PM

Some less actively traded names seeing bullish order flow: Onyx Pharmaceuticals (ONXX), Illimuna (ILMN), Convergys (CVG) Bearish order flow: Meridian Holdings (MHLD), Prepaid Legal Services (PPD), Grand Canyon Education (CGNX) Post Earnings: Marvell Tech (MRVL) Pre-Earnings: Poniard Pharmaceuticals (PARD) Ex-div.: Public Service Enterprise (PEG), Traveler's (TRV), Reynolds American (RAI), Ameren (AEE), PPL, Baxter (BAX), News Corp (NWSA).

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Royal Caribbean Cruises Ltd (RCL) $29.61 +2.32%

3/5/2010 3:19:52 PM

Royal Carribean (RCL) is up 64 cents to $29.58 and options volume is 5X the average daily, led by a buyer of 20K June 25 puts at $1.075 per contract. It was tied to shares at $29.25 and appears to be a volatility play, the day after Goldman upped the stock to Neutral from Sell. Earnings due mid-to-late April.

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Best Buy Company (BBY) $38.60 +3.90%

3/5/2010 2:19:52 PM

Best Buy (BBY) is up $1.45 to $38.60 and options volume is 3X the average daily levels, with 29,000 calls and 19,000 puts traded so far. While some of the activity in the March 38, 39 and 40 calls is likely closing, April 38, 40, and 41 calls are among the most actives. Some players are likely opening new positions ahead of Best Buy's March 25 earnings release. Plus, Apple Computer now says its iPad will be available in the US on April 3. According to a recent Apple Insider report, the new device will be available at a variety of different locations and not just the Apple retail store. Best Buy was mentioned. So, the gains in BBY shares and the uptick in call volume might be in anticipation of the US debut of Apple's iPad.

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More Options Commentaries and Observations by Schaeffer�s

Option Activity Alert: Has Medivation, Inc. Found a Floor?

Calls have been a popular choice on Medivation, Inc. (MDVN) in recent sessions. During the past five trading days, speculators on the International Securities Exchange (ISE) have bought to open 13,127 calls on MDVN, compared to just 6,189 puts. The stock's five-day ISE call/put volume ratio of 2.12 underscores a strong bias toward bullish bets over bearish.

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Options Update: Call Buyers Bombard RadioShack Corp.

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FuelCell Energy Inc. Awash in Bearish Sentiment Ahead of Earnings

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Early Edge: Burger King, Evergreen Solar, Force Protection, and MGM Mirage

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