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Option Trends: Research In Motion Ltd (BBRY), United States Steel Corporation, and Bank of America Corp (BAC)

BBRY calls are flying off the shelves, while X and BAC have been targeted by put buyers

by 6/11/2013 11:26:21 AM
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Speculative players have been taking sides on BlackBerry maker Research In Motion Ltd (NASDAQ:BBRY), commodity concern United States Steel Corporation (NYSE:X), and blue-chip financial issue Bank of America Corp (NYSE:BAC), according to data from the major options exchanges. While the latter two have both attracted heavy put volume in recent weeks, BBRY has become a favorite among call buyers. Here's a closer look at recent option activity on these three stocks.

Research In Motion Ltd (NASDAQ:BBRY)

During the past five days, options traders on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 12,368 calls on BBRY, compared to just 2,709 puts -- resulting in a call/put volume ratio of 4.57.

Expanding the scope, BBRY has racked up a 10-day call/put volume ratio of 4.45 on the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). Not only does this ratio indicate that traders have bought to open more than four bullish bets for every bearish, it also arrives in the 98th percentile of its annual range. This suggests options players have purchased calls over puts at a faster pace only 2% of the time during the last year.

This trend toward calls coincides with the U.S. debut of the Q10 smartphone, the global sales of which are doing "better than expected," according to Jefferies. On the charts, however, Research In Motion Ltd hasn't lived up to the hype, underperforming the broader S&P 500 Index (SPX) by 13 percentage points during the past month. Plus, the equity -- last seen at $13.88 -- is staring up at its formerly supportive 10-week and 20-week moving averages, which could limit upside in the intermediate-term. Against this backdrop, an unwinding of optimism in the options pits could exacerbate selling pressure on BBRY.

United States Steel Corporation (NYSE:X)

X, meanwhile, has been a favorite target among put buyers. During the past five sessions, speculators on the ISE and CBOE have bought to open 16,214 puts, compared to 6,251 calls -- resulting in a put/call volume ratio of 2.59. As a result, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 1.41, just 4 percentage points from a 52-week peak. Or, in simpler terms, near-term options players have rarely been more put-heavy during the past year.

Sentiment is also skeptically skewed elsewhere on Wall Street. Short interest accounts for 41.2 million X shares, or 28.7% of the stock's total available float. In fact, at the security's average pace of trading, it would take more than a week to repurchase all of these pessimistic positions.

Technically speaking, the bearish bias toward X isn't too surprising, considering the stock has lagged the SPX by 19 percentage points during the past three months. The equity -- currently trading at $17.02 -- touched a new multi-year low of $15.80 back in April, and has spent the better part of 2013 beneath its 10-week and 20-week trendlines.

Bank of America Corp (NYSE:BAC)

Finally, put buyers have also taken a shine to BAC. The stock's 10-day put/call volume ratio on the ISE/CBOE/PHLX of 0.48 ranks higher than 88% of all other readings of the past year, pointing to a healthier-than-usual appetite for bearish bets of late.

Garnering notable attention has been the June 13 put, which has seen more than 20,000 contracts added in the past 10 sessions. This strike is now home to more than 65,300 contracts outstanding -- second only to the deeper out-of-the-money June 11 put, with nearly 70,000 contracts in residence.

Juxtaposed against BAC's year-over-year chart, this skepticism seems overdone. The stock has rallied more than 81% during the past 12 months, and is currently flirting with $13.20. What's more, BAC touched a two-year high of $13.99 in late May. A reversal in sentiment in the options pits could add contrarian fuel to the fire.

In the same vein, just eight out of 25 analysts offer up "buy" or better ratings for Bank of America Corp. Furthermore, the average 12-month price target of $13.45 is just a hair's breadth from the stock's current perch. A wave of upgrades and/or price-target hikes could also translate into a tailwind for the blue chip.

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