Option Skews - Relatively Heavy Call Activity on Citigroup Inc, Wal-Mart Stores Inc, and Dendreon Corp

Citigroup Inc (C), Wal-Mart Stores Inc (WMT), and Dendreon Corp (DNDN) were among the stocks that saw a bias toward call buying on Thursday.

Regular readers of this space will likely note that Citigroup is no stranger to the call side of this scan. As noted last month , there has been a steady preference for upside bets as bank bailout chatter grew. Thursday brought over 101,000 calls compared to 39,000 puts. A check of the front-month open interest configuration graph shows more than 390,000 calls have built up at the 3 strike. One point to keep in mind though is that some of the call activity could be as a hedge against short positions. Earlier this month the stock appeared on my scan for stocks advancing amid heavy short interest. According to data collected by our Quantified Analysis group, 18% of the stock's float is sold short. A quick glace at the sentiment profile shows that the number of shares sold short exploded higher last month.

Wal-Mart Stores was in the spotlight on Thursday after reporting same-store sales. The lackluster data caused the stock to gap lower and left it with a loss on the day. However, the reaction among option traders was optimistic as more than 6,000 calls were purchased on the International Securities Exchange (ISE).

Shares of Dendreon Corp surged higher earlier this month but what makes Thursday's activity really interesting is what is happing today. The stock is bid up more than 20% but there appears to be little in the way of news headlines crossing the wires this morning. Though, there is some chatter about a looming conference. It will be interesting to see what develops here.

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

Other companies seeing a skew towards calls in the previous session: Dell Inc (DELL), General Electric (GE), Intel Corp. (INTC), Sun Microsystems (JAVA), SunTrust Banks (STI), BMC Software (BMC), AMR Corp. (AMR), Goldman Sachs Group (GS), Varian Medical Systems (VAR), SanDisk Corp. (SNDK), Bristol-Myers Squibb (BMY), Savient Pharmaceuticals, Inc (SVNT), Dow Chemical (DOW), Freeport-McMoRan Copper & Gold Inc (FCX), Amdocs (DOX), Schlumberger N.V. (SLB), Hartford Financial Services Group (HIG), Fifth Third Bancorp (FITB), Halliburton (HAL), Visa Inc. (V), Regions Financial Corp (RF), DryShips Inc. (DRYS).

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