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Option Trends: Coinstar, Dendreon, and Walgreen

Put players favor CSTR and WAG, while call buyers are drawn to DNDN

by 12/10/2012 1:15 PM
Stocks quoted in this article:

Options traders are taking sides on Redbox parent Coinstar, Inc. (NASDAQ:CSTR - 50.66), biotech stock Dendreon Corporation (NASDAQ:DNDN - 5.01), and drugstore chain Walgreen Company (NYSE:WAG - 36.32), according to volume data from the major options exchanges. While puts have become quite popular on CSTR and WAG, speculative players prefer calls on DNDN. Here's a closer look at the latest trends in the options pits for these three hot stocks.

Beginning with CSTR, options traders on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 1,669 puts over the past five days, compared to just 186 calls. In other words, speculators have picked up 8.97 puts for every CSTR call over the past week.

CSTR weekly price chartOn the ISE, CBOE, and NASDAQ OMX PHLX (PHLX), CSTR has garnered a 10-day put/call volume ratio of 1.26. This ratio ranks above 81% of comparable readings taken during the previous year, suggesting that option players have shown a stronger preference for puts over calls just 19% of the time.

CSTR is up 10.3% year-to-date, and the stock is attempting to bounce back from a recent slump. The shares closed last Friday atop their 10-week and 20-week moving averages for the first time since July 13 -- but former resistance in the $52-$54 lies just overhead, and could potentially halt the stock's rebound.

As for DNDN, there have been 5,083 calls and 150 puts bought to open over the past five days on the ISE and CBOE, netting the stock a lopsided call/put volume ratio of 33.89. To put this action in historical perspective, the equity's 10-day ISE/CBOE/PHLX call/put volume ratio stands at 6.13, in the 63rd annual percentile. This confirms an increased appetite for calls over puts in recent weeks.

DNDN is down about 36% year-to-date, but the stock recently broke out above resistance at its 80-day moving average. The shares are now attempting to find a foothold above the $5 level, which is home to heavy call open interest of 4,014 contracts in the December options series.

Options traders have bought to open 5,499 puts on WAG over the past five days, according to the ISE and CBOE, compared to only 707 calls. In fact, the stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.59 ranks in the 92nd percentile of its annual range, as speculators have snapped up puts over calls at a faster pace only 8% of the time.

Interestingly enough, this period of increased put-buying coincides with a steep rally for WAG. Since hitting a near-term low of $31.88 on Nov. 16, the stock has gained nearly 14%. However, the shares are now trading just below familiar resistance in the $37-$38 area, which has served as a stubborn technical ceiling since August 2011.


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