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Qihoo 360 Technology Co Ltd (NYSE:QIHU - 30.56) has been charting a steady path up the charts, and the positive price action isn't being lost on option players. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 555 calls for every 100 puts during the past 10 sessions. What's more, the resultant call/put volume ratio of 5.55 ranks in the 90th percentile of its annual range, suggesting a healthier-than-usual appetite for calls over puts in recent weeks.
It's a trend that is echoed in the stock's call-skewed Schaeffer's put/call open interest ratio (SOIR) of 0.85. Not only does this show that call open interest outweighs put open interest among options expiring in three months or less, but it ranks lower than 98% of other such readings taken in the past year. In other words, short-term speculators have rarely been more call-heavy toward the security.
Calls certainly emerged as the options of choice on Monday. More than 8,500 contracts crossed the tape, more than double the average daily volume for call options. Meanwhile, fewer than 3,200 puts were exchanged. The most active strike on the day was QIHU's January 2013 30-strike call, which saw almost 2,200 contracts trade. A healthy portion of these crossed at the ask price, and open interest added close to 1,300 positions overnight, pointing to buy-to-open activity.
By purchasing these near-the-money calls, traders will begin to profit with each step above breakeven at $30.93 (the strike plus the volume-weighted average price [VWAP] of $0.93) QIHU takes through the Jan. 18 close, when these options expire. This is a 1.2% premium to the stock's current price.
As touched upon, QIHU was a technical standout in 2012, with the stock adding more than 89% on the year. In fact, a rumored partnership with Google Inc (NASDAQ:GOOG) sent the shares to a 19-month high of $29.80 on Monday. Given that short interest currently accounts for more than one-fifth of QIHU's available float, some of this recent call volume could be short sellers hedging against their pessimistic positions.
The stock's upward momentum is continuing in today's session, with QIHU jumping to a new peak of $30.88 right out of the gate.