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Option Activity Alert: Call Volume Spikes on CVS Caremark Corporation

The equity was hammered after earnings, prompting unusually heavy option volume

by Elizabeth Harrow (eharrow@sir-inc.com) 11/6/2009 1:30 PM

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Call volume exploded on CVS Caremark Corporation (CVS: sentiment, chart, options) yesterday, with activity surging to 30 times the norm in the wake of the drugstore chain's most recent earnings report. During the course of the session, traders on the International Securities Exchange (ISE) bought to open 26,051 calls on CVS, compared to just 6,393 puts. The stock's single-day call/put volume ratio of 4.07 reveals that bullish bets more than quadrupled their bearish counterparts.

CVS SOIR The equity's 10-day ISE call/put volume ratio now stands at 2.85, as calls bought to open during the past two weeks have roughly tripled puts. This ratio ranks in the 79th annual percentile, revealing that speculators have snapped up calls over puts at a faster pace only 21% of the time within the past year.

Conversely, CVS' Schaeffer's put/call open interest ratio (SOIR) is hovering not far from an annual bearish peak, with the current SOIR of 0.95 lingering just six percentage points from a fresh 52-week high. However, it's worth noting that this indicator has dipped considerably from its Oct. 28 reading of 1.39, as traders have added more near-term calls than puts during this time frame. The drop in the stock's SOIR seems to confirm the rising optimism evidenced by ISE volume data.

The most active CVS strike on Thursday was the stock's November 30 call, where 50,037 contracts crossed the tape on open interest of just 51 contracts. Open interest here ballooned overnight, and now stands at a hefty 27,478 contracts. Now, the November 30 strike is the undisputed home of peak call open interest for the front-month series.

CVS open interest Meanwhile, on the put side, peak open interest consists of just 9,641 contracts, which are also resting at the November 30 strike. In today's session, traders appear to be adding a flood of new puts at the December 30 strike, where 6,199 contracts have changed hands on open interest of just 5 contracts.

Elsewhere on Wall Street, the number of CVS shares sold short jumped sharply during the most recent reporting period, rising by 15.4%. However, these bearish bets account for just 1.3% of the equity's float, representing a rather slim accumulation of sideline cash.

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Option Activity Alert: Call Volume Spikes on CVS Caremark Corporation

The equity was hammered after earnings, prompting unusually heavy option volume

by Elizabeth Harrow (eharrow@sir-inc.com) 11/6/2009 1:30 PM

CVS

stocks

options