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Option Trends: Alcatel Lucent, Gilead Sciences, and Vringo

Traders prefer calls on ALU and VRNG, while puts are in demand on GILD

by 10/4/2012 12:45:54 PM
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Speculative investors are taking sides on telecom concern Alcatel Lucent SA (NYSE:ALU - 1.05), biotech stock Gilead Sciences, Inc. (NASDAQ:GILD - 69.63), and mobile software developer Vringo, Inc. (NYSEAMEX:VRNG - 5.25), according to volume data from the major options exchanges. Calls have been gaining traction on ALU and VRNG, while option players prefer puts on GILD. Here's a closer look at the latest trends in the options pits for these three hot stocks.

First up, traders on the Chicago Board Options Exchange (CBOE) have bought to open 1,493 calls on ALU during the past five sessions, compared to only two puts. From a broader view, the stock has racked up a 10-day call/put volume ratio of 14.56 on the CBOE, International Securities Exchange (ISE), and NASDAQ OMX PHLX (PHLX). In other words, traders currently prefer bullish bets over bearish on ALU by a wide margin.

ALU weekly price chartIn fact, ALU's 50-day ISE/CBOE/PHLX call/put volume ratio of 24.77 arrives in the 92nd percentile of its annual range, as speculators have rarely purchased calls over puts at a faster pace during the past year.

Of course, with ALU trading just north of $1 per share, it's not surprising to see a general lack of interest in put options. The stock is down more than 60% year-over-year, and is pinned below resistance at its 10-week and 20-week moving averages.

As for GILD, speculators on the ISE have bought to open 4,622 puts during the past five days, easily outstripping the 605 calls bought to open. Now, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio registers at 1.80, in the 87th annual percentile -- revealing a healthier-than-usual appetite for bearishly oriented options.

On the other hand, analysts have taken a bullish view of GILD. In addition to a Bernstein upgrade earlier this week, the stock on Wednesday scored a price-target hike to $80 from $65 at UBS. Technically speaking, the stock has surged more than 71% so far this year -- which means it's possible that some put buyers are actually GILD shareholders looking to protect their paper profits.

Turning to VRNG, call options have emerged as the clear favorite over the past week. During this time frame, speculators on the ISE and CBOE have bought to open 12,846 calls, compared to only 472 puts. In other words, traders have scooped up more than 27 calls for every put. Likewise, the security's 10-day ISE/CBOE/PHLX call/put volume ratio checks in at a similarly skewed 18.35.

In today's trading, VRNG is living up to bullish expectations with a bounce of more than 20%. Earlier, the shares tapped a fresh record high of $5.55, bolstered by a favorable court decision in its patent spat with Google (GOOG).

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