Speculative players are taking sides on streaming music provider Sirius XM Radio Inc (NASDAQ:SIRI), as well as electronics retailers Best Buy Co., Inc. (NYSE:BBY) and RadioShack Corporation (NYSE:RSH), according to data from the major options exchanges. More specifically, traders are scooping up SIRI and BBY puts, and purchasing RSH calls at a faster-than-usual clip. Here's a closer look at recent option activity on these three stocks.
Sirius XM Radio Inc (NASDAQ:SIRI)
During the past five days, options traders on the International Securities Exchange (ISE) have bought to open 7,067 puts on SIRI, compared to fewer than 800 calls -- resulting in a put/call volume ratio of 9.30. This ratio is among the top 20 on the exchange, underscoring the heavy put skew of late.
Broadening that to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) (and expanding the scope to two weeks), SIRI sports a 10-day put/call volume ratio of 0.76 -- just 4 percentage points from a 12-month peak. In other words, option buyers have been scooping up SIRI puts, relative to calls, at a near-annual-high pace during the past couple of weeks.
Attracting notable attention has been the in-the-money October 4 put, where roughly 3,000 contracts were added over the last 10 sessions. SIRI -- currently lingering near $3.93 -- hasn't conquered the $4 level on a monthly closing basis since November 2006. By purchasing the puts to open, the buyers expect SIRI to remain south of this strike through options expiration on Friday, Oct. 18.
The 4 strike is also home to peak call open interest in the front-month series, with more than 21,000 contracts outstanding. In the short term, this abundance of bullish bets overhead could exacerbate resistance in the $4 region.
Of course, the out-of-the-money calls could've been purchased as hedges by short sellers. Short interest edged 4.6% higher during the past two reporting periods, and now represents nearly eight sessions' worth of pent-up buying demand, at SIRI's average pace of trading. Should SIRI extend its long-term ascent -- the stock has added more than 53% over the past year, tagging a new six-year high of $3.99 on Sept. 20 -- a short-covering situation could add contrarian fuel to the fire.
Best Buy Co., Inc. (NYSE:BBY)
BBY has racked up a 10-day ISE/CBOE/PHLX put/call volume ratio of 1.49, which stands higher than 95% of comparable readings of the last 12 months. Or, simply put, option traders have purchased BBY puts over calls at a much faster-than-usual rate during the past two weeks.
As a result, the stock's Schaeffer's put/call open interest ratio (SOIR) has risen to 1.52, indicating that puts outnumber calls among options expiring within three months. This ratio sits just 13 percentage points from an annual peak, implying that near-term option players are more put-biased than usual at the moment.
Growing more popular has been the deep out-of-the-money December 29 put, which has seen almost 3,500 contracts added during the past 10 sessions. Meanwhile, the even deeper out-of-the-money December 23 put remains home to peak put open interest among the front-three months series of options, with nearly 11,000 contracts in residence.
On the charts, BBY has been outstanding, more than tripling in 2013. In fact, the stock tagged a new two-year high of $39.28 earlier this month, but is now taking a breather in the $37.87 vicinity. Against this backdrop, it's possible that BBY shareholders picked up out-of-the-money puts to guard against a short-to-intermediate-term pullback. Their primary goal remains for BBY to extend its climb, but the puts lock in an acceptable price at which to sell their shares, should the equity take a turn for the worse.
Despite BBY's impressive technical performance, nine out of 20 analysts maintain "hold" or worse opinions. Likewise, the consensus 12-month price target of $38.45 is within striking distance of BBY's current perch, and it would take almost a week to repurchase all the shorted BBY shares, at the stock's average pace of trading. A round of upgrades and/or price-target hikes, or a short-covering rally, could help the shares assail new heights.
RadioShack Corporation (NYSE:RSH)
Finally, RSH sports a 5-day call/put volume ratio of 19.16 on the ISE, as traders have bought to open nearly 1,000 calls and just 51 puts during the last week. In the same vein, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio of 5.64 ranks in the 76th percentile of its annual range, pointing to a healthier-than-usual appetite for long calls, relative to puts, of late.
As such, the stock's SOIR has fallen to a 12-month low of 0.34, indicating that near-term calls haven't been favored over puts by a wider margin in the past year. While the out-of-the-money October 5.50 call has seen more than 4,000 contracts initiated during the last 10 sessions, the October 4 strike is home to peak call open interest of more than 20,000 contracts outstanding. Considering RSH is lingering near $3.37, any short-term rebound attempts could stall in the face of potential options-related resistance in the $4 region.
It's worth noting, however, that short interest accounts for a whopping 38.5% of RSH's total available float. At the equity's average daily trading volume, it would take more than two weeks to buy back all of these bearish bets. It's possible that the growing affinity for long calls could be attributable to short sellers looking to hedge against a near-term rally.
Since tagging an annual peak of $4.36 earlier this month, the shares of RSH have given back 22.7%.
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