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

Contrarians Should Keep an Eye on CBS

Potential sideline cash could point to more upside for outperforming CBS

by 8/16/2012 2:13 PM
Stocks quoted in this article:

The shares of CBS Corporation (NYSE:CBS - 36.06) have been on fire lately, more than doubling since skimming the $18 level less than a year ago. In fact, the security touched a fresh nine-year acme of $36.25 earlier today. Ushering the equity into the black have been its 10-week and 32-week moving averages, which have contained all but one of the stock's weekly closes since early October. However, despite CBS' impressive performance on the charts, the bullish camp is far from crowded -- pointing to potential sideline cash to drive additional gains.

Weekly Chart of CBS since October 2011 With 10-Week and 32-Week Moving Averages

For starters, CBS has outperformed the broader S&P 500 Index (SPX) by more than eight percentage points during the past 60 sessions. However, over the past 50 sessions, option players bought to open nearly three CBS puts for every call. Specifically, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 50-day put/call volume ratio of 2.74 -- which ranks in the 86th percentile of its annual range. In other words, traders have initiated bearish bets over bullish at a much faster-than-usual clip in recent months.

As a result, the equity's Schaeffer's put/call open interest ratio (SOIR) now stands at 1.76, indicating that puts nearly double calls among the front three-months' series of options. What's more, this ratio stands just four percentage points from an annual high, implying that near-term option players have rarely been more put-heavy on CBS during the past year.

However, peak put open interest in the soon-to-be front-month September series of options resides at the 29 strike, with more than 5,600 puts in residence. In the short term, this abundance of bearish bets could translate into a layer of options-related support for CBS.

Elsewhere on the Street, some analysts remain leery of CBS, regardless of the stock's long-time journey into the black. Currently, the consensus 12-month price target on the security sits at a measly $38.85, representing expected upside of just 7% to CBS' multi-year high of $36.25. Going forward, an unwinding of pessimism in the options pits, or a flood of upbeat analyst attention, could add contrarian fuel to the stock's fire.

Investors betting on an extended uptrend for CBS should consider buying the stock's in-the-money December 29 call, which was last offered for $7.30.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
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.