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LinkedIn Corp (LNKD) Traders Eye a Strong End to the Week

LNKD's June 185 call is the most active strike today

by 6/18/2013 12:11 PM
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LinkedIn Corp (NYSE:LNKD) is trading higher today on the heels of an early morning bullish brokerage note. As such, calls are outpacing puts by a margin of more than 2-to-1. Short-term speculators are eyeing additional upside through week's end, and are targeting the June 185 call. The majority of the 1,869 contracts traded have done so at the ask price, implied volatility has risen, and data from the International Securities Exchange (ISE) confirms that some of this activity is of the buy-to-open kind.

By purchasing the out-of-the-money calls for a volume-weighted average price (VWAP) of $1.21, traders will begin to profit with each step north of $186.21 (strike plus VWAP) LNKD takes through Friday's close, when front-month options expire. This breakeven mark represents expected upside of 4.1% to the stock's current perch at $178.87. The options market doesn't seem too confident this call will land in the money ahead of expiration, as delta for the position is docked at 0.19, or 19%. Should the stock fail to topple the strike price, though, the most the traders have on the line is the initial premium paid.

With LinkedIn Corp (NYSE:LNKD) having advanced more than 56% year-to-date, it's not surprising to see a call-skewed trend in its options pits. In fact, traders at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 20,246 calls throughout the past 10 sessions, compared to 10,523 puts. What's more, the resultant call/put volume ratio of 1.92 ranks higher than 92% of similar readings taken in the past year, suggesting calls have been scooped up over puts at a near annual-high clip of late.

This tendency toward calls is echoed in LinkedIn's Schaeffer's put/call open interest ratio (SOIR) of 0.73. Not only does this indicate that calls outweigh puts in the front three-months' series of options, but it also ranks in the 5th percentile of its annual range. Simply stated, short-term speculators have rarely been more call-heavy toward LNKD.

As touched upon, the equity is having a tremendous time on the charts this year. Assisting this upward momentum is LNKD's 20-week moving average, which has been doing right by the stock since early December. LinkedIn recently pulled back after hitting a record peak of $202.91 on May 2, but found a solid layer of support atop this rising trendline.

As mentioned, the equity is continuing to move higher today, after Pacific Crest started LNKD with an "outperform" rating, and a price target of $215.


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