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Option Activity Alert: Alcoa Inc. Could Be Pinned by Out-of-the-Money Calls

The aluminum giant is staring up at heavy call open interest in the November series

by Elizabeth Harrow (eharrow@sir-inc.com) 11/6/2009 12:20 PM

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Call volume has easily outpaced put activity on Alcoa Inc. (AA: sentiment, chart, options) recently. During the past five days, traders on the International Securities Exchange (ISE) bought to open 33,463 calls on AA, compared to just 2,713 puts. The stock's five-day ISE call/put volume ratio stands at 12.33, as traders have picked up more than a dozen calls for every put on AA during the previous week.

AA SOIR As a result, AA's 10-day ISE call/put volume ratio is moving into bullish territory. The current ratio of 2.13 reveals that calls bought to open have more than doubled puts within the past two weeks, and it ranks higher than 63% of other such readings taken during the past year. This elevated percentile rank reveals that speculators are currently purchasing calls over puts at a faster pace than usual.

Along these same bullish lines, AA's Schaeffer's put/call open interest ratio (SOIR) arrived today at 0.40, with calls more than doubling puts among options set to expire within three months. This ratio is resting just eight percentage points from an annual low, indicating that short-term option traders have rarely been more bullishly aligned toward the aluminum giant.

In the front-month series, peak call open interest consists of 29,863 contracts at the November 15 strike. However, there are hefty call accumulations at neighboring strikes, as well: the November 17 has 22,047 calls outstanding; the November 14 strike carries open interest of 21,945 calls, and the November 16 call has 20,544 contracts in residence.

AA short interest Meanwhile, peak put open interest for the series can be found at the November 13 strike, which carries 16,415 contracts. Not far behind is the November 12 put, which is home to 13,363 contracts. AA is currently trading near $13 per share, which means that call players are favoring out-of-the-money options, while put traders prefer less ambitious bets. This configuration underscores the heavy-handed bullish sentiment revealed by the stock's recent option volume.

During the short term, the preponderance of calls at out-of-the-money strikes could serve to keep AA pinned on the charts. As expiration draws closer, the unwinding of hedges related to this open interest could serve as a headwind, keeping the shares stifled near their current trading range.

Of course, this might not be unwelcome news for the stock's call players, as it seems that some of these contracts might have been picked up to hedge short stock positions. Short interest on AA jumped by 16.2% during the past month, and now accounts for nearly 8% of the equity's float. With buy-to-open call volume rising in tandem with short interest, the possibility is strong that some of these calls were simply purchased as hedges against an unexpected rally.

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Option Activity Alert: Skepticism Builds Toward Chevron Corporation

(11/20/2009 2:05:53 PM)

Puts are quickly becoming the options of choice on Chevron Corporation (CVX: sentiment, chart, options). On Thursday, speculators on the International Securities Exchange (ISE) bought to open 3,102 puts on the oil major, compared to just 400 calls. The stock's single-day put/call volume ratio arrived at 7.76, as traders snapped up nearly eight times more puts than calls.

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Option Activity Alert: Pessimistic Players Pummel Warner Chilcott Plc

(11/20/2009 11:32:34 AM)

Warner Chilcott Plc (WCRX: sentiment, chart, options) has become a favorite target of put players. During the past 10 days, speculators on the International Securities Exchange (ISE) have bought to open 2.90 puts for every call on WCRX. In other words, bearish bets have nearly tripled their bullish counterparts during the past two weeks. This reading ranks in the 100th annual percentile, revealing that traders are purchasing puts over calls at a more rapid pace than any other time during the past year.

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Option Activity Alert: Skepticism Creeps In on Peabody Energy Corporation

(11/18/2009 11:43:05 AM)

Put options have rarely been more popular on Peabody Energy Corporation (BTU: sentiment, chart, options). On Tuesday, traders on the International Securities Exchange (ISE) bought to open 1,970 puts on BTU, compared to just 162 calls. The stock's single-day put/call volume ratio of 12.16 reveals that speculative investors scooped up more than a dozen bearish bets for every bullish contract.

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Option Activity Alert: Call Volume Rises on United States Natural Gas Fund, LP

(11/17/2009 2:45:59 PM)

Call options are steadily gaining popularity on United States Natural Gas Fund, LP (UNG: sentiment, chart, options). On Monday, traders on the International Securities Exchange (ISE) bought to open 4,252 calls on the exchange-traded fund (ETF), compared to 1,557 puts. In short, nearly three times more calls than puts were purchased.

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Option Activity Alert: Bulls Bombard Apple Inc.

(11/17/2009 11:50:07 AM)

Apple Inc. (AAPL: sentiment, chart, options) is becoming a favorite target of call players. On Monday, traders on the International Securities Exchange (ISE) bought to open 17,088 calls on the iPhone parent, compared to just 4,079 puts. In other words, speculators snapped up 4.19 times more bullish bets than bearish.

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Option Activity Alert: Rising Bullish Speculation on Rosetta Resources Inc.

(11/16/2009 1:00:45 PM)

Buy-to-open call volume has been steadily building on Rosetta Resources Inc. (ROSE: sentiment, chart, options). During the past 10 days, speculators on the International Securities Exchange (ISE) have bought to open 163.46 calls for every put on the equity, revealing a hefty skew toward bullish bets over their bearish counterparts. This ratio ranks higher than all other such readings taken during the past year, indicating that traders have attained an annual optimistic peak.

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Option Activity Alert: Traders Have Their Doubts About VMware, Inc.

(11/16/2009 12:30:29 PM)

Bearish sentiment appears to be rising toward VMware, Inc. (VMW: sentiment, chart, options). On Friday, traders on the International Securities Exchange (ISE) bought to open 1,551 puts on VMW, compared to just 165 calls. The stock's single-day put/call volume ratio of 9.40 reveals that bearish option buys easily outpaced their bullish counterparts.

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Option Activity Alert: Put Volume Picks Up on Freeport-McMoRan Copper & Gold Inc.

(11/13/2009 2:00:09 PM)

Put volume has been accelerating lately on Freeport-McMoRan Copper & Gold Inc. (FCX: sentiment, chart, options). During the past 10 days, traders on the International Securities Exchange (ISE) have bought to open 0.94 put for every call on FCX. While calls purchased have narrowly outnumbered puts during the past two weeks, this ratio actually ranks higher than 81.1% of other such readings taken during the previous year. In other words, option traders have snapped up puts over calls at a faster pace only about 19% of the time.

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Option Activity Alert: Goldman Sachs Group, Inc. Garners Bullish Attention

(11/13/2009 12:08:18 PM)

Calls have been the options of choice lately on Goldman Sachs Group, Inc. (GS: sentiment, chart, options). On Thursday, Nov. 12, traders on the International Securities Exchange (ISE) bought to open 4,113 calls on GS, compared to 3,829 puts. The equity's single-day call/put volume ratio of 1.07 indicates that bullishly oriented options were in slightly greater demand than their bearish counterparts.

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Option Activity Alert: Call Buying Spikes on Assured Guaranty Ltd.

(11/12/2009 1:15:19 PM)

Call volume has been unusually heavy lately on Assured Guaranty Ltd. (AGO: sentiment, chart, options). In fact, on Wednesday alone, call activity surged to 37 times the usual levels, with 27,000 contracts crossing the tape. Yesterday's activity was no anomaly, though -- the International Securities Exchange (ISE) reports that traders have bought to open 19,953 calls on AGO during the past five days, compared to just four puts.

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Option Activity Alert: Alcoa Inc. Could Be Pinned by Out-of-the-Money Calls

The aluminum giant is staring up at heavy call open interest in the November series

by Elizabeth Harrow (eharrow@sir-inc.com) 11/6/2009 12:20 PM

AA

stocks

options