Call volume was heavy yesterday on Hansen Natural Corporation (HANS: sentiment, chart, options), with activity accelerating to twice the average daily levels. During the course of the session, traders on the International Securities Exchange (ISE) bought to open 1,972 calls on HANS, compared to just 19 puts. The stock's single-day call/put volume ratio of 103.79 reveals that traders on Tuesday displayed a clear preference for bullish bets over their bearish counterparts.
This optimistic bias is also reflected by the security's 10-day ISE call/put volume ratio of 6.53, which ranks higher than 96% of other such readings taken during the past year. Not only does this ratio indicate that calls bought to open have more than sextupled puts during the previous two weeks, it also suggests that traders have purchased calls over puts at a faster pace only 4% of the time during the past year.
As speculators snap up calls on HANS at a rapid pace, the equity's Schaeffer's put/call open interest ratio (SOIR) has plummeted to a new annual nadir. The current SOIR of 0.39 is the lowest such reading for HANS during the past 52 weeks, revealing that bullish sentiment has climbed to extreme levels among short-term option players.
In Tuesday's trading, the most active HANS option was the September 32 call. This at-the-money strike saw 2,522 contracts change hands on open interest of just 509 contracts. Most of the volume here traded between the bid and ask prices, but a 4.9% jump in the option's implied volatility suggests a skew toward buying activity. Today, open interest at the September 32 call stands at 2,938 contracts.
However, this isn't the most popular call in the stock's front-month series. That honor goes to the out-of-the-money September 37 strike, with 3,556 open positions. Not far behind is the even deeper out-of-the-money September 40 call, with 3,440 contracts outstanding. Generally speaking, this bias toward overhead call strikes suggests that some traders have high hopes for a short-term rally out of the shares.
By contrast, put open interest in the front-month series is virtually negligible. The in-the-money September 41 strike carries peak put open interest of just 981 contracts, indicating that very few speculators are expecting the stock to decline during the near term.
Elsewhere on Wall Street, short sellers have been bailing out of their bearish bets. During the past month, short interest on HANS plummeted by 26.3%. However, shorted shares still account for a robust 11% of the equity's available float, revealing that there are still some potential buyers waiting on the sidelines.
From a technical perspective, HANS has shed 3.4% year-to-date. However, with merger-and-acquisition activity beginning to pick up once again, it's possible that some of the recent call purchases were based on the expectation for a potential buyout bid -- Wall Street speculation has often cited Coca-Cola (KO) as a logical suitor for the small-cap beverage company.
Of course, it's also possible that some of the stock's short sellers are hedging their bearish positions with out-of-the-money calls. In any event, it seems unlikely that the shares' price action of late would inspire any truly bullish speculation. HANS is facing stiff resistance from its 20-week moving average, and the security has been pinned between this trendline and its 10-week counterpart since early August.
While the stock hardly looks poised to pop, it doesn't exactly seem destined to plunge, either. HANS has recently established a foothold atop the $31.50-to-$32 neighborhood, which previously served as resistance. Along with the security's 10-week trendline, this region could continue to provide support for the shares.
So, barring the possibility of a healthy takeover bid from Coke, it looks as though HANS will most likely continue to edge sideways in its current trading range during the short term. However, the stock's fans should be concerned about its inability to capitalize on the recent influx of short-covering support -- despite the resulting burst of buying pressure, the shares have failed to break out of their intermediate-term slump.
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