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Sirius XM Radio Inc (SIRI) Bulls Throw in the Towel

SIRI call speculation has decreased dramatically over the last month

by 4/18/2013 2:44 PM
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The shares of Sirius XM Radio Inc (NASDAQ:SIRI) have been on a road to nowhere in recent months, and options players have started to notice. Speculative activity has been mixed of late -- from long-term bearish bets to even longer-term bullish plays -- but the overall trend has been away from call buying.

On the Monday after March options expired (March 18), the 10-day call/put volume ratio for SIRI stood at 7.07. That means that in the two weeks prior on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than seven calls had been bought to open for every put. In the subsequent weeks, this ratio has dropped all the way to 2.99. In fact, the current reading is lower than 94% of the past year's worth of data, suggesting that speculators have rarely been so disinterested in purchasing calls (relatively speaking).

Similarly, the Schaeffer's put/call open interest ratio (SOIR) for Sirius XM Radio Inc (NASADAQ:SIRI) has approached a three-month high of 0.40. An increasing SOIR indicates that put open interest is becoming more prominent -- relative to call open interest -- for options that expire in the next three months. The most active strike within the front three months, however, is the June 3.50 call, where more than 28,000 calls are in residence. While these could represent intermediate-term, options-related resistance, the strike is over 17% above the stock's current price of $2.99, giving the shares plenty of "wiggle room" before running into this potential ceiling.

On the charts, the stock has shuffled between the $3.00 and $3.20 levels for much of 2013, gaining just over 3% since the beginning of the year -- as a point of comparison, the S&P 500 Index (SPX) has added 8.1% this year. The stock is now poised to close south of its 20-week moving average for the second time in three weeks. Prior to its April 5 violation of this trendline, Sirius shares had traded above the 20-week since mid-July.

Much of this stagnancy could have to do with the satellite radio firm's relationship with its erstwhile savior, Liberty Media Corp (NASDAQ:LMCA). Liberty rescued Sirius from bankruptcy in 2009 and then mounted an unsolicited campaign to acquire a controlling stake, completing this effort in January. Just last week, former LMCA CEO Greg Maffei took the helm at Sirius as its new chairman. With Liberty clearly becoming more comfortable in its role, shareholders (and speculators) may be hesitant to make a move until they see what's next.


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