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Strong Quarterly Earnings Lure Call Players to Titan Machinery

Call activity ramps up on TITN post-earnings

by 4/12/2012 10:25 AM
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Shares of Titan Machinery, Inc. (TITN - 32.81) rallied yesterday, after the company reported stronger-than-expected fourth-quarter earnings. As a result, nearly 4,100 calls crossed the tape, reflecting an impressive 30 times the equity's average daily volume. More than 1,300 of these calls were exchanged at the in-the-money April 30 strike -- more than half of them at the ask price, suggesting they were bought. Open interest at this strike rose by 58 contracts overnight, suggesting that some of the volume consisted of new positions. This option is now home to peak call open interest of 951 contracts.

This preference for calls over puts is more of the same for TITN. The 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 5.84, confirming that calls bought to open have outnumbered puts by almost six to one during the last two weeks.

Meanwhile, short interest on the agricultural equipment retailer increased by 13.6% during the past month, and now accounts for a lofty 9.2% of TITN's float -- or almost eight days' worth of pent-up buying demand, at the stock's average daily volume. This could mean that some of the aforementioned buy-to-open call volume is the work of short sellers looking to hedge their bets.

TITN has been a technical outperformer lately, having gained more than 45% year-to-date, and besting the broader S&P 500 Index (SPX) by over 28% during the last 60 days. On the charts, the stock is trading well above its 50-week moving average, which has acted as support since mid-January. In fact, the equity tagged a new multi-year high of $33.39 during Wednesday's session.

In the first hour of trading, TITN is up about 2.4% to wink at the $32.81 level.


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