Stocks quoted in this article:
Despite a rather lackluster showing on the charts, option traders are buying calls on MEMC Electronic Materials, Inc. (WFR) like they're going out of style. On Tuesday alone, for example, speculators on the International Securities Exchange (ISE) bought to open 6,358 calls on WFR, compared to just one lonely put that was purchased.
Plus, the equity has racked up a 10-day ISE call/put volume ratio of 54.62, as traders have bought to open nearly 55 times more bullish bets than bearish during the past two weeks. This ratio ranks higher than 98.3% of other such readings taken during the previous year, indicating that option players on this exchange have almost never shown a greater appetite for calls over puts.
In the same bullish vein, WFR's Schaeffer's put/call open interest ratio (SOIR) currently stands at a 52-week low of 0.23, as short-term speculators are more optimistically aligned toward the shares now than at any other time during the past year.
In fairness, it's possible that some of these calls were purchased to hedge short stock positions. Short interest on WFR increased by 7.7% during the past month, and these pessimistic positions now represent a respectable 6.9% of the security's float.
Nevertheless, considering WFR's uninspiring price action, the general lack of put buying is troubling. The stock is currently staring up at double-barreled resistance on the charts: Its 40-week trendline has acted as a technical ceiling since early October 2009, and the looming $15 level rejected WFR's mid-January rally attempt. If the equity continues to underperform on the charts, an unwinding of bullish bets could exacerbate WFR's technical troubles.