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Option Activity Watch: AMEX Financial Select Sector Fund, AT&T, Tesoro

by Jocelynn Drake (jdrake@sir-inc.com) 4/5/2005 1:13 PM

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A daily feature available on SchaeffersResearch.com is "Option Activity Watch." Every day, we'll focus on three stocks that generated a great deal of option trading. We hope that this will effectively offer stock information, particularly on equities that are currently popular among those in the investing community.

AT&T

Ma Bell is seeing some heavy call trading this afternoon. AT&T's (T: sentiment, chart, options) July 20 call has had more than 10,100 contracts cross the tape on open interest of more than 16,500. Overall, sentiment scrambled over into the bulls' camp recently. The equity's Schaeffer's put/call open interest ratio (SOIR) has dropped to 0.71 and is lower than 79 percent of all readings taken over the past 52 weeks. Furthermore, short interest plunged by 10 percent in March to 18.6 million shares � a new multi-year low. The stock's short-interest ratio now rests at a meager 3.52 days to cover. Meanwhile, Wall Street is still panning the shares, with all 17 of the analysts following T rating it a "hold" or worse.

Technically speaking, T jumped above its 10-day and 20-day moving averages today. The stock has not enjoyed a daily close above both of these short-term trendlines since March 7. On the other hand, the stock is hitting resistance at its weekly moving averages and at the 20 level. The 20 region has capped the equity's rally attempts since January 2004. From a longer-term perspective, T is being squeezed between resistance at the 20 level and support at its 20-month moving average in the 18.50 region. Traders should keep a close eye on the stock's 20-month trendline, as a breach of this support level could send the shares sharply lower.

Tesoro

Tesoro (TSO: sentiment, chart, options) is an independent oil refiner and marketer with six refineries in Alaska, California, Hawaii, North Dakota, Washington, and Utah. The security has been the focus of some heavy options trading this afternoon, with more than 2,000 contracts crossing the tape at its May 22.50 put. With open interest of roughly 3,000 contracts, we shall have to wait until tomorrow to see if this surge in volume translates into new positions. Checking in on the stock's sentiment indicators, we find that investors are still quite optimistic about the shares. The security's SOIR sits at 0.79 in the 20th percentile. In addition, short interest edged one percent lower last month to 3.5 million shares, resulting in a short-interest ratio of 2.88 days to cover.

As with T, Wall Street still has its doubts about the firm. According to Zacks, six of the 13 analysts following T rate it a "hold" and two rate it a "strong sell." This leaves ample room for potential upgrades.

From a technical perspective, the shares have resumed their rally higher, gapping above resistance at the 38 level. What's more, TSO continues to rally along the support of its 10-week and 20-week moving average. In fact, TSO has enjoyed the flawless support of its ascending 10-month trendline since March 2003.

The equity's stellar technical performance combined with pessimism from the Street has earned the security a Schaeffer's Equity Scorecard ranking of 7.0 out of 10.

AMEX Financial Select Sector Fund

The financial sector has seen optimism recently explode. The exchange-traded fund (ETF) AMEX Financial Select Sector Fund (XLF: sentiment, chart, options) has attracted some heavy call trading today, as options speculators pile into the equity's June 29 strike. More than 7,200 contracts have changed hands this afternoon on open interest of roughly 12,000 contracts. What's more, the ETF's SOIR has dropped from 3.82 on March 22 to its current perch of 1.97 (in the 37th percentile).

On the other hand, short interest surged 53 percent higher in March to 40.5 million shares � a new multi-year high. The equity short-interest ratio rest at 5.16 days to cover, providing ample fuel for a potential short-squeeze rally.

From a technical perspective, the shares have drifted lower since hitting a January high under resistance at their 10-day and 20-day moving averages. Furthermore, the XLF has breached former support at the 29.40 level. To make matters worse, the ETF closed below its 10-month and 20-month moving average in March for the first time in roughly two years.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/20/2009 10:45:27 AM)

Welcome to our new video series, Options Stew, where we take a look back at what's been cookin' in the option pits this week. Join us as we sample just a few of the unusual option plays from the past week, with our "recipe" broken down into three unique segments:

read more...

Schaeffer's Media Outtake: Thoughts on Hedging, Volatility

(11/19/2009 4:15:00 PM)

"Standard & Poor's, the world's leading index provider, announced today the launch of the S&P 500 Dynamic VEQTOR Index which dynamically allocates between equity, volatility and cash to provide broad equity market exposure with an implied volatility hedge. 'Implied equity volatility typically has a strong negative correlation to equity market returns, and is considered a useful tool to hedge against the potential downside risk of the broad equity market,' says Liz Taxin, Director of Strategy Indices for S&P Indices. The S&P 500 Dynamic VEQTOR Index is comprised of three components: Equity, as represented by the S&P 500; Volatility, as represented by the S&P 500 Short-Term VIX Futures Index; and Cash, as represented by the Overnight LIBOR rate. The Index allocates between equity and volatility based on the combination of realized and implied volatility trend decision variables, and these allocations are evaluated on a daily basis."
(PR newswire � 11/18/09)

read more...

Put Trading Swells on J. Crew Group Ahead of Earnings

(11/18/2009 11:05:48 AM)

Retailers continue to line up for the earnings confessional, and one particular high-flyer is slated to release its quarterly report next week. J. Crew Group Inc. (JCG: sentiment, chart, options) is known for its preppy fashions, including jeans, khakis, and other basic (but often pricey) items sold to young professionals. J. Crew sells through its catalogs, Web sites, and some 300 retail and outlet stores in the U.S. under the J. Crew, crewcuts (for kids), and Madewell banners. Madewell, launched in 2006, is a women's-only collection of hip, casual clothes.

read more...

Drilling Down on Rowan Companies' Rally Prospects

(11/18/2009 10:00:00 AM)

Rowan Companies Inc. (RDC: sentiment, chart, options) performs contract drilling of oil and gas wells. Its fleet consists of 22 jack-up rigs and 32 land-drilling rigs. The company operates primarily in the Middle East, Texas, the Gulf of Mexico, and the North Sea.

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Drug Delay Prompts Put Trading on ISIS Pharmaceuticals, Inc. (ISIS)

(11/17/2009 1:50:13 PM)

Bearish option bettors have virtually blitzed ISIS Pharmaceuticals, Inc. (ISIS: sentiment, chart, options) today, with intraday put volume skyrocketing to nearly 38 times the norm. The pharmaceutical firm this morning confessed that it's delaying plans to seek approval for experimental drug mipomersen by nearly a year, from mid-2010 to mid-2011.

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Pre-Earnings Option Activity Accelerates on Sears Holdings Corporation

(11/16/2009 1:55:56 PM)

Sears Holdings Corporation (SHLD: sentiment, chart, options) has been a hot topic on both sides of the options aisle today, as investors race to place their bets ahead of the retailer's looming turn on the earnings stage. According to Thomson Reuters, the firm is expected to report its third-quarter figures before the opening bell on Thursday, Nov. 19.

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Options Traders Bulk Up on Puts on Software Vendor

(11/13/2009 12:34:23 PM)

Options players are placing some heavy bets that salesforce.com inc. (CRM: sentiment, chart, options) is going to suffer a disappointing earnings report next week, as traders load up on puts. The International Securities Exchange (ISE) has reported 2.7 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 93.8% of all those taken during the past year. In other words, puts are significantly more popular than calls among traders.

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Hopes Are Riding High for GameStop's Earnings

(11/13/2009 11:35:33 AM)

The video game sector is struggling. U.S. video game sales dropped by 18% in October compared to the same period last year, according to the latest data from NPD Group. Meanwhile, analysts had forecast a more modest decline of 11%.

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Options Stew: A Taste of the Week's Spiciest Plays

(11/13/2009 10:55:42 AM)

Betting on a Short-Term Bounce for First Solar, Inc. (FSLR)

(11/12/2009 3:15:41 PM)

Call traders have been fond of First Solar, Inc. (FSLR: sentiment, chart, options) today, despite the solar concern's retreat into the red. In afternoon trading, the security has already seen roughly 18,000 calls cross the tape � nearly tripling its average intraday volume of fewer than 6,250 contracts.

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Option Activity Watch: AMEX Financial Select Sector Fund, AT&T, Tesoro

by Jocelynn Drake (jdrake@sir-inc.com) 4/5/2005 1:13 PM

TSO

XLF

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