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Bulls Hop On as VMware, Inc. (VMW) Runs Higher

Call volume has picked up on VMW in recent weeks

by 3/14/2013 11:39 AM
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Some bullish attention from the brokerage bunch has lifted shares of VMware, Inc. (NYSE:VMW - 83.51) today, and the positive price action isn't being lost on option traders. Around 9,300 calls have crossed the tape so far, more than four times the average intraday volume. By comparison, around 4,200 puts have changed hands. VMW's March 80 call is one of the more active strikes, where north of 1,300 contracts have traded. The majority of these have gone off at the ask price, and data from the International Securities Exchange (ISE) indicates a number of positions have been bought to open.

The volume-weighted average price (VWAP) for the in-the-money calls is $2.84, making breakeven $82.84 (strike price plus VWAP). Today's price pop has put VMW north of this level, and speculators will continue to profit with each step higher the stock takes through tomorrow's close, when front-month options expire.

Widening the sentiment scope reveals that bullish speculation has been growing on VMW, despite the stock's 11% year-to-date deficit. At the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio is currently docked at 4.47, compared to its Feb. 22 reading of 1.35. What's more, the most recent ratio ranks higher than 97% of similar readings taken in the past year, suggesting calls have been bought to open over puts at a near annual-high clip.

As such, the equity's Schaeffer's put/call open interest ratio (SOIR) has dropped to 0.61 from 0.81 since Feb. 22, as near-term call open interest surged almost 58%. This ratio falls in the 14th percentile of its annual range, implying short-term speculators are more call-heavy than usual toward VMW.

As touched upon, the stock has struggled in 2013. However, the equity has made a solid rebound since hitting a two-year low of $70.05 on Feb. 21, with the shares up almost 20%. Additionally, VMW is on pace to notch its first weekly close atop its 10-week moving average since late January.

At last check, the stock was more up around 3% to trade near $83.51.


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