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Option Activity Alert: Speculators Feeling Skeptical Toward Ferro Corporation

Put volume is on the rise as the stock continues its long-term downtrend

by Elizabeth Harrow (eharrow@sir-inc.com) 11/2/2009 11:30 AM

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Put volume was heavy last Friday on Ferro Corporation (FOE: sentiment, chart, options), with activity surging to 16 times the expected level. During the course of the session, traders on the International Securities Exchange (ISE) bought to open 1,230 puts on FOE, compared to just one call. In short, the day's option activity revealed a clear bias toward bearish bets.

FOE SOIR Friday's most active put was FOE's April 2010 7.50 strike, where 3,350 contracts crossed the tape. A slight majority of these puts traded at the ask price, suggesting a bias toward buying activity, and open interest at this strike jumped over the weekend by 3,349 contracts -- confirming that nearly all of the day's volume consisted of freshly opened positions.

In today's trading, the downbeat bias continues. Within the first hour of trading, speculators sent 1,100 contracts across the tape on FOE's April 5 put, with 99% changing hands at the ask price. This strike currently has 4,030 contracts in residence, narrowly edging out the aforementioned 7.50 strike to claim the title of peak put open interest for the series.

As a result of the recent bearish influx, FOE now sports a 10-day ISE put/call volume ratio of 829.50, which reveals that puts bought to open have outnumbered their call counterparts by a comically wide margin during the past two weeks. This reading is the highest such ratio taken within the past year, as speculators on this exchange have never shown a greater appetite for pessimistic positions on the equity.

FOE open interest In the same vein, FOE's Schaeffer's put/call open interest ratio (SOIR) is resting at inflated levels. The current SOIR of 0.87 ranks higher than 84% of other such readings taken in the previous 52 weeks. In other words, short-term option players have been more skeptically aligned toward FOE only 16% of the time during the past year.

In the front-month series, put players are dividing their attention between the November 12.50 and 15 strikes. The latter is home to peak put open interest of 1,200 contracts, while the former has a respectable 1,154 contracts in residence. Meanwhile, on the call side, peak open interest consists of a mere 316 contracts at the 10 strike.

With FOE trading shy of $6 at last check, put speculators are showing a serious bias toward in-the-money options. On the other hand, the light smattering of call traders who have set their sights on the security are opting for out-of-the-money strikes. However, with short interest accounting for a healthy 8.6% of FOE's float, some of these out-of-the-money calls may have been picked up as hedges.

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Option Activity Alert: Speculators Feeling Skeptical Toward Ferro Corporation

Put volume is on the rise as the stock continues its long-term downtrend

by Elizabeth Harrow (eharrow@sir-inc.com) 11/2/2009 11:30 AM

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