Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Call Volume Soars on Smith & Wesson Holding Corporation (SWHC)

Tuesday's traders were betting on a post-earnings surge for SWHC

by 6/26/2013 10:31 AM
Stocks quoted in this article:

As Smith & Wesson Holding Corporation (NASDAQ:SWHC) prepared to report quarterly earnings after yesterday's close, speculators were feeling particularly bullish toward the gun maker. Approximately 13,000 calls crossed the tape during the course of Tuesday's session, which was about five times the norm. Conversely, fewer than 2,750 puts changed hands. A large portion of these traders were eyeing the $11 mark, which hasn't been surmounted by the equity since December.

Jumping right in, close to 5,600 contracts traded at the July 11 call for a volume-weighted average price (VWAP) of $0.15. The majority of these out-of-the-money calls were exchanged at the ask price, implying they were bought. Meanwhile, open at this strike jumped by 3,565 contracts overnight, confirming the initiation of fresh optimistic bets. By purchasing the calls to open, traders are counting on SWHC to power north of $11.15 (strike price plus the VWAP) by front-month expiration. This reflects an increase of about 14.9% from the stock's present perch at $9.70.

However, even if the equity remains south of the $11 level, the call buyers shouldn't lose too much sleep over it, considering the most they stand to lose is the initial premium paid for their long positions. What's more, SWHC's Schaeffer's Volatility Index (SVI) of 46% ranks lower than all but 21% of similar annual readings. In other words, the stock's front-month options are relatively cheap right now.

This campaign for calls over puts is business as usual for the security. In fact, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) reveals a 20-day call/put volume ratio of 4.21 for SWHC. Or, in simpler terms, traders have bought to open more than four calls for every put during the past month.

From a technical perspective, Smith & Wesson Holding Corporation (NASDAQ:SWHC) has advanced about 15% year-to-date, and roughly 43% on a year-over-year basis. However, this is a decrease from yesterday, as the stock is currently off about 2.9% today, despite last night's strong turn in the earnings confessional. The firm said fiscal fourth-quarter earnings more than doubled due to strong demand, while revenue boasted double-digit revenue growth and higher margins.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.