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Option Trends: Applied Materials, Qlik Technologies, and MGM Resorts

Puts are the options of choice on AMAT and QLIK, while calls are popular on MGM

by 7/10/2012 12:18:06 PM
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Option volume has been heating up lately on semiconductor specialist Applied Materials, Inc. (NASDAQ:AMAT - 10.83), software stock Qlik Technologies Inc. (NASDAQ:QLIK - 18.24), and casino concern MGM Resorts International (NYSE:MGM - 10.54). Puts have been in heavy rotation on AMAT and QLIK, while, call players are rolling the dice on MGM. Here's a closer look at the latest trends in the options pits for these three hot stocks.

Bearish speculation is rising on AMAT, with puts crossing the tape at a rapid pace in recent weeks. Over the past five sessions, traders on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 4,069 puts on AMAT, compared to just 339 calls. The resulting five-day ISE/CBOE put/call volume ratio of 12.00 reveals that a dozen times more bearish bets than bullish have been purchased over this time frame.

Widening our scope, AMAT sports a 10-day put/call volume ratio of 7.07, based on buy-to-open data from the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). This reading is lodged in the 99th percentile of its annual range, within striking distance of a pessimistic peak.

AMAT daily price chartLikewise, the Schaeffer's put/call open interest ratio (SOIR) for AMAT currently stands at 0.71, which ranks above 80% of other such readings taken during the past year. In other words, short-term speculators have been more skeptically aligned toward the stock only 20% of the time.

Short sellers have also been raising the bearish stakes, as short interest on AMAT swelled by 13.7% during the most recent reporting period. However, these shorted shares account for a modest 1% of the equity's float, implying that negative sentiment is still far from peak levels among stock traders.

Technically speaking, AMAT is down 15.2% over the past year, with the stock deepening its decline today on the heels of a disappointing guidance update. However, the shares remain perched north of the psychologically significant $10 level, as well as their year-to-date breakeven at $10.71. On the other hand, resistance looms overhead from AMAT's 50-day and 80-day moving averages.

QLIK daily price chartElsewhere in the tech sector, traders on the ISE bought to open 2,070 puts on QLIK over the past five days, compared to just 156 calls. The stock's resulting put/call volume ratio of 13.27 highlights a strong preference for pessimistically oriented options.

Echoing that bearish bias, the 10-day ISE/CBOE/PHLX put/call volume ratio for QLIK now stands at 1.39, which ranks in the 76th percentile of its annual range. This elevated percentile rank confirms that traders have been showing a healthier-than-usual appetite for puts over calls.

Short interest has also ticked higher, rising by 1.3% during the most recent reporting period. Now, these bearish bets represent a healthy 6.1% of QLIK's float, or 4.4 times the stock's average daily trading volume.

The stock has managed to claw higher today, despite being hit with price-target cuts from no fewer than seven brokerage firms ahead of the bell. With QLIK's Relative Strength Index (RSI) standing at a slim 27, though, this may simply be an oversold bounce.

On the charts, QLIK gapped below the $20 level amid last Friday's sell-off. Going forward, this formerly supportive round-number region could switch roles to act as resistance. Year-to-date, the shares have shed 25.7% of their value.

MGM weekly price chartFinally, options traders have purchased 6,286 MGM calls during the past five days, according to the ISE and CBOE, while only 542 puts have been purchased. In other words, investors have picked up 11.60 times more calls than puts during the previous week.

Now, the stock boasts a 10-day ISE/CBOE/PHLX call/put volume ratio of 12.94, which ranks in the optimistically slanted 98th annual percentile. Indeed, MGM's 50-day call/put volume ratio of 3.46 also arrives in the 98th percentile of its annual range, confirming that traders have purchased calls over puts a faster pace just 2% of the time.

Elsewhere, short interest accounts for a notable 8.5% of the security's float, as plenty of bears are betting on MGM to slide. In light of this data, it's possible that the recent trend toward calls over puts may be related to increased hedging activity by the shorts.

Checking out the stock's unpleasant technical setup, this theory seems relatively likely. MGM has beaten a steady path lower since late March, thanks in part to resistance at its descending 10-week moving average. The shares are fractionally higher today after scoring a new "buy" rating at Cantor Fitzgerald, but MGM is still down 25.4% over the past 52 weeks.

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