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Option Activity Alert: Put Volume Accelerates on Raytheon Company

Bearish bets are the options of choice as the stock stagnates beneath resistance

by Elizabeth Harrow (eharrow@sir-inc.com) 10/26/2009 12:30 PM

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Skepticism appears to be on the rise toward Raytheon Company (RTN: sentiment, chart, options) following the firm's third-quarter earnings report last Thursday. The International Securities Exchange (ISE) reports that during the past five days, traders have bought to open 6,751 puts on RTN, compared to just 3,028 calls. In other words, speculative investors have preferred bearish bets over their bullish counterparts by a margin of 2.23 to one.

RTN SOIR Looking back over the past 10 days, RTN's ISE put/call volume ratio mellows out to a slightly tamer 1.53. However, this reading ranks higher than 92.6% of other such readings taken during the past year, suggesting that traders have rarely purchased puts over calls at a faster pace.

This negativity is also reflected by RTN's Schaeffer's put/call open interest ratio (SOIR), which rose today to 1.12. Not only does this ratio reveal that puts outnumber calls among options set to expire within three months, it also ranks just one percentage point away from a fresh 52-week high. This elevated SOIR indicates that short-term traders have been more pessimistically aligned toward RTN only 1% of the time within the past year.

Elsewhere, short interest on the defense issue has recently crept higher, revealing that option players aren't the only group with a downbeat bias toward RTN. During the past month, short interest surged by nearly 9% -- and these pessimistic positions rose by 6.3% during just the most recent reporting period. This uptick in the number of shares sold short points to a rising bearish tide on Wall Street.

RTN short interest In the front-month series, peak put open interest of 4,999 contracts can be found at the 47.50 strike. The November 45 put isn't far behind, though, with 4,266 open positions. With the shares trading near $46.50 at last check, RTN is perched squarely between these two popular strikes.

Meanwhile, on the call side, speculators are also dividing their attention between in-the-money and out-of-the-money options. The November 47.50 strike is home to peak call open interest of 5,924 contracts, while the November 46 strike has 5,439 calls in residence. In short, this configuration suggests that traders are expecting only modest movement from RTN during the near term.

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Option Activity Alert: Put Volume Accelerates on Raytheon Company

Bearish bets are the options of choice as the stock stagnates beneath resistance

by Elizabeth Harrow (eharrow@sir-inc.com) 10/26/2009 12:30 PM

RTN

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