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Put activity has ramped up on VMware, Inc. (NYSE:VMW - 95.72) today, as around 3,500 of these options have crossed the tape so far -- more than tripling the equity's expected intraday put volume. By comparison, fewer than 900 calls have been exchanged. Most popular has been the April 100 put, where nearly 2,700 contracts have changed hands at a volume-weighted average price (VWAP) of $10.29.
Digging deeper into the data, it looks as though these contracts were evenly split between the ask and bid prices, pointing to a mix of buyer- and seller-driven activity. Because today's volume exceeds current open interest levels -- along with the fact that implied volatility has edged higher during the course of the session -- it can be assumed that new positions are being initiated here. In the case of the bought-to-open puts, traders are counting on VMW to fall south of $89.71 (strike price minus the VWAP) by the time April options expire.
This penchant for puts over calls is nothing new for the software concern. Data pulled from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 20-day put/call volume ratio of 1.13 for VMW. In other words, traders have bought to open 113 puts for every 100 calls during the last four weeks.
VMW has put forth a commendable technical performance in 2012, gaining more than 15% year-to-date, and outpacing the broader S&P 500 Index (SPX) by nearly 10 percentage points during the past two months. What's more, the stock is on pace to finish December atop its 10-month moving average -- a feat accomplished just one other time since April.