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After the close on Wednesday, Verity (VRTY – 22-1/16) reported second-quarter earnings of 23-cents per share, exceeding the Street's collective expectation of 20-cents per share. Although the shares closed off 11/16 for the day, they traded as high as $21 in after-hours activity. This morning, the shares are trading up over 20 percent, just above the technically significant 22 mark. This level provided support during October and November and is close to the descending 10-week moving average. This level could offer resistance, but a clean close above it would be truly constructive for this stock caught in bear mode.
Options traders appear to be extremely optimistic about VRTY and short sellers are not active, as the equity's current short interest ratio stands at 1.61. Yesterday's Schaeffer's put/call open interest ratio (SOIR) for VRTY stood at 0.26. This means that there were just 26 open put contracts for every 100 open call contracts in options with up to three months of life left. What is missing from this empirical glance is the huge open interest at the far out-of-the-money December 35, 40, and 55 call strikes. Many of these positions were added during the stock's consolidation this past summer, before it began declining from the September peak of 47.
Options activity heading into earnings has been muted. Yesterday's activity was concentrated around the 20 strike. The December 20 put had volume of 233 contracts, translating into 156 new positions, while the December 20 call had volume of 500 contracts, translating into 226 new positions.