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Option Trends: ARNA, MRVL, and CTXS

Calls have been active on Arena and Marvell Tech, while puts are popular on Citrix Systems

by 6/21/2012 12:20:54 PM
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Options traders are taking sides on drug company Arena Pharmaceuticals, Inc. (ARNA - 11.18), semiconductor stock Marvell Technology Group Ltd. (MRVL - 11.59), and cloud computing concern Citrix Systems, Inc. (CTXS - 78.58). While call buying has ramped up lately on ARNA and MRVL, CTXS has been heavily targeted by put players. Here's a closer look at the latest trends in the options pits for these three hot stocks.

During the past five trading days, speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 86,770 calls on ARNA, compared to just 24,814 puts. The resulting call/put volume ratio of 3.50 confirms that traders have purchased over three times more bullish bets than bearish in this time frame.

ARNA daily price chartIn fact, ARNA has racked up a 10-day call/put volume ratio of 3.73, based on combined data from the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). However, this ratio arrives in the tepid 23rd percentile of its annual range, indicating that bullish speculation on the drug stock is still far from peak levels.

The recent interest in ARNA calls coincides with a string of new multi-year highs for the shares, which topped out today at $11.37 -- their loftiest price since October 2007. The stock sports a massive year-to-date gain of 461.5%, having bolted considerably higher from its December 2011 close at $1.87.

Bullish bettors are likely looking ahead to June 27, when ARNA is slated to receive a final ruling from the Food and Drug Administration (FDA) on its obesity drug. Lorcaserin already received the nod from an FDA panel, and this new crop of call players appears to be preparing for a favorable vote next Wednesday.

As for MRVL, options traders on the ISE and CBOE have bought to open 4,986 calls and 111 puts during the past five days, netting the tech stock an optimistically slanted call/put volume ratio of 44.92. The equity's 10-day ISE/CBOE/PHLX call/put ratio now stands at 11.70, in the 88th annual percentile.

MRVL daily price chartFrom a broader perspective, the security's 50-day call/volume ratio on these three exchanges currently checks in at 6.89. Not only does this number indicate that bullishly oriented options have easily outnumbered their bearish counterparts in recent weeks, it also ranks higher than 92% of other such readings taken during the previous year. In other words, speculators have scooped up MRVL calls over puts at a faster pace just 8% of the time.

Meanwhile, short sellers have been hitting the exits. Short interest on MRVL plunged by 24% during the most recent reporting period, and now accounts for a meager 1% of the stock's float.

On the charts, MRVL has stumbled its way to a loss of 13.3% in 2012, underperforming the broader equities market by a considerable margin. The shares have lately been pressured lower by resistance at their 10-day and 20-day moving averages, which have thwarted all rally attempts since late April. With a general lack of pessimism levied against this laggard, MRVL could be vulnerable to another wave of selling as some of the weaker bullish hands are shaken out.

On the other side of the options aisle, CTXS has been in the hot seat with put buyers lately. Traders on the ISE have purchased 2,188 puts and 371 calls during the past five days, which translates into a put/call volume ratio of 5.90.

CTXS weekly price chartTo put this data in historical perspective, CTXS has now garnered a 10-day put/call volume ratio of 2.57 on the ISE, CBOE, and PHLX. This ratio ranks in the 92nd annual percentile, as options traders on these exchanges have rarely shown a greater preference for bearishly biased options over their bullish counterparts.

Further cementing this negative attitude, the Schaeffer's put/call open interest ratio (SOIR) for CTXS is docked at 1.13, with puts outnumbering calls among options slated to expire within three months. This SOIR ranks above 84% of other such readings taken over the past year, confirming that speculators are more skeptical than usual toward the tech company.

In the same pessimistic vein, short interest on CTXS ballooned by 39.9% during the most recent reporting period, as a new batch of bears placed their bets against the stock.

Technically speaking, CTXS is resting easy on a healthy year-to-date gain of 33.2%. The shares have found support this year at their 10-week, 20-week, and 40-week moving averages, which have effectively cushioned all of the stock's pullbacks since early February. Given the equity's resilience on the charts, it's possible that some put buyers are actually CTXS shareholders looking to lock in paper profits, or guard against a potential breach of support.

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