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Options Players Order Up Calls on OpenTable

Today's pop has OPEN facing off with the $45 mark

by 4/26/2012 1:25:57 PM
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Option activity is accelerated on OpenTable, Inc. (OPEN - 44.06) in today's session, with both calls and puts trading at three times their average intraday volume. Calls are winning the numbers race, though, with approximately 2,250 contracts changing hands. By comparison, fewer than 1,650 puts have crossed the tape.

Today's campaign for OPEN calls is just continued behavior for options players, as the stock boasts a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 2.63. What's more, this ratio ranks higher than 97% of other such annual readings, suggesting that bullish bets have been picked up over bearish at a near annual-high clip in recent months.

Echoing this apparently optimistic outlook is OPEN's Schaeffer's put/call open interest ratio (SOIR) of 0.73. Not only does this show that call open interest outweighs put open interest among options slated to expire in the next three months, but the ratio ranks in the 38th percentile of its annual range. In other words, short-term speculators are more call-heavy than usual toward the stock.

From a long-term perspective, OPEN's technical backdrop is dismal. During the previous 12 months, the stock has lost more than 62% of its value. The security is making every effort to redeem itself, and has added 6.5% on a year-to-date basis. In fact, OPEN has followed the broader equities market into the black today, with the stock up around 5% at last check. This pop has the stock testing the $45 mark -- an area that has alternately served as both support and resistance for OPEN since late 2011.

Weekly Chart of OPEN since July 2011

Coupling OPEN's longer-term technical struggles with its recently positive price action, this rise in call volume may simply be the result of short sellers picking up hedges on their bearish bets. As it turns out, despite short interest backpedaling by 10.2% during the previous two reporting periods, short interest still accounts for an outlandish 46.6% of the stock's available float.

In the short term, OPEN could benefit from some contrarian tailwinds. Should the stock continue to display positive price action, additional short sellers may be encouraged to reduce their bearish exposure on OPEN -- thereby providing a fresh influx of buying pressure.

A positive first-quarter earnings report next Tuesday night could also help the stock's case, as OPEN has exceeded consensus profit estimates in each of the past four quarters.

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