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In yesterday's options pits, bullish traders focused their attention on Xerox Corporation (NYSE:XRX) -- up 32.3% year-to-date. Moreover, roughly 11,000 calls were exchanged, which is three times the daily norm and almost eight times the number of puts traded. Most of this activity took place at the in-the-money July 9 call, where nearly 8,000 contract crossed at a volume-weighted average price (VWAP) of $0.36. The majority of contracts went off at the ask price, implied volatility increased by 2.3%, and open interest added 4,000 positions overnight, suggesting buy-to-open activity.
In order for yesterday's call buyers to profit, XRX -- currently docked above the 9 strike at $9.02 -- has to climb at least 3.8% to finish north of the breakeven price of $9.36 (strike price plus the VWAP) by the close on July 19, when back-month options expire. If XRX remains below the mark or falls south of the 9 strike, the most call buyers risk losing is the initial premium paid. The option's delta currently sits at 0.52, representing a greater than 1-in-2 chance that it will finish in the money by expiration.
From a broader sentiment perspective, calls have outnumbered puts for XRX during the past two weeks. More specifically, the stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day call/put volume ratio stands at 8.93, indicating that traders have bought to almost 9 calls for every put over the past 10 sessions. This ratio ranks in the 57th percentile of its annual range, signifying that traders' appetites for calls is slightly higher than normal.
Xerox Corporation's Schaeffer's Volatility Index (SVI) of 23% ranks lower than all but 10% of similar readings taken within the last 12 months, meaning XRX options are comparatively cheap right now. In other words, even if the stock fails to climb high enough to reward today's bulls, the initial premium they will be forced to part with is relatively minimal.