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SanDisk Corporation (SNDK) Sees a Surge in Bullish Near-Term Betting

Optimistic speculators hone in on SNDK's weekly options

by 2/25/2013 12:56 PM
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SanDisk Corporation (NASDAQ:SNDK - 50.35) has found itself in the bullish trading limelight today, as roughly 11,000 calls have crossed the tape so far. This marks a 65% increase over the equity's expected intraday call volume, and is almost triple the number of puts exchanged. The weekly 3/1 51-strike call is seeing a considerable amount of action, with close to 1,800 contracts traded at a volume-weighted average price (VWAP) of $0.54.

The bulk of these near-the-money calls changed hands at the ask price, signaling buyer-driven volume. Since this option currently holds open interest of just 635 contracts -- and implied volatility was last seen almost 8 percentage points higher -- it's a safe bet that some of today's volume consists of newly added positions. By purchasing these calls to open, traders are counting on SNDK to trek north of breakeven at $51.54 (strike price plus the VWAP) by the close this Friday, which is when these weekly options expire. The delta for this strike currently stands at 0.39, indicating these calls have a 39% chance of finishing in the money.

This preference for bullish options over bearish is nothing new for SNDK. In fact, the security's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 2.78, indicating calls bought to open have outstripped puts by a margin of nearly 3-to-1 during the past couple of weeks. This ratio registers in the 83rd percentile of its annual range, conveying traders have rarely bought calls over puts at a faster clip during the last 12 months.

SNDK has had a decent run on the charts in 2013 so far, boasting a year-to-date advance of close to 16%. What's more, the data storage provider has outperformed the broader S&P 500 Index (SPX) by nearly 14 percentage points over the past three months. Meanwhile, the stock is on pace to finish a third consecutive month atop its 10-month moving average, which had previously served as resistance.

At last check, SNDK is up about 1.8% to wink at the $50.35 level.


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