Option Skews - Relatively Heavy Call Activity on Citigroup Inc, Research in Motion Limited, Palm Inc

Here are the stocks that saw a bias toward call activity in the previous session. This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective.

Companies included in today's scan results: Citigroup Inc (C), Research in Motion Limited (RIMM), Weatherford International (WFT), E-Trade Financial Corp (ETFC), Motorola (MOT), Wal-Mart Stores Inc (WMT), Intel Corp. (INTC), DryShips Inc. (DRYS), Yahoo! Inc (YHOO), Ford Motor Co (F), YRC Worldwide Inc (YRCW), American International Group Inc (AIG), The DirectTV Group Inc (DTV), Palm Inc (PALM), Norfolk Southern (NSC), MasterCard Incorporated (MA), Las Vegas Sands Corp (LVS), Pepsico (PEP), Genworth Financial Inc (GNW), Occidental Petroleum (OXY), Dynegy (DYN), Rowan Companies (RDC), Diana Shipping Inc. (DSX), Walgreen (WAG), General Mills (GIS).

Citigroup Inc, Research in Motion Limited, and Palm Inc are the charts that stood out to me -

• My last check of Citigroup showed the stock was pulling back to retest former resistance as support. The updated daily chart shows the equity has so far held there. While Citigroup recently appeared my short interest scan, the new data shows short interest has plunged.
• Friday's post noted Research in Motion's rejection at resistance. Here we see that the drop was met with some call buying. The stock is hitting oversold levels and nearing short-term support but I am usually not one to try to catch a falling knife.
• I recently discussed the near-term range on Palm. The stock saw some activity last week amid buyout chatter. A look to the daily chart shows this has the shares flirting with a breakout. According to data collected by our Quantified Analysis department, 39% of the stock's float is sold short. While that can exacerbate volatility, it can also lead to call buying as a hedge to the short positions.

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