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Alcatel Lucent SA (ADR) (NYSE:ALU) has rallied more than 145% in 2013, tagging a two-year acme of $3.61 last Tuesday. Against this backdrop, option players are picking up ALU calls over puts at a faster-than-usual pace. In fact, during the past five sessions, ALU has racked up a call/put volume ratio of 84.02 on the International Securities Exchange (ISE) -- among the top 15 highest for all optionable stocks -- with nearly 4,800 calls and just 57 puts exchanged.
Expanding that to include data from the Chicago Board Options Exchange (CBOE) and NASDAQ OMX PHLX (PHLX) -- and widening the scope to 50 sessions -- the stock sports a call/put volume ratio of 15.50. In other words, traders have bought to open more than 15 ALU calls for every put during the last 10 weeks.
The near-the-money 3.50-strike call has grown increasingly popular in both the September and soon-to-be front-month October series of options. Specifically, more than 4,000 September 3.50 calls and upwards of 6,000 October 3.50 calls have been added over the past week. While the October 3.50 strike is now home to peak call open interest of close to 11,000 contracts, the September 2 strike is still the most popular in the front-month series, with more than 20,600 contracts in residence.
For those who purchased the calls to open, they expect ALU to climb north of $3.50 through the options' respective lifetimes. If ALU remains south of the strike through expiration, risk is limited to the initial premium paid for the calls. At last check, ALU has surrendered 2% to linger near $3.38, as traders digest news that the company has entered a licensing agreement and settled all pending litigation with Wi-LAN Inc. (NASDAQ:WILN).
Regardless of the growing affinity for ALU calls, short-term speculators are still more put-biased than usual. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.34 ranks higher than 83% of all other readings of the past year.
Analysts are also wary of ALU, which has outperformed the broader S&P 500 Index (SPX) by a whopping 67 percentage points during the past three months. Currently, five out of nine analysts maintain "hold" or worse opinions of the equity. Plus, the consensus 12-month price target stands at $2.93, representing a discount to ALU's current price.
As a result of its recent ascent, Alcatel Lucent SA (ADR) (NYSE:ALU) boasts a Relative Strength Index (RSI) of 73 -- in overbought territory, suggesting today's pullback may just be a much-needed breather. Should the security extend its upward momentum, a flood of upbeat analyst attention could translate into a contrarian boon for ALU.