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Call Volume Jumps on Pan American Silver, Despite Weak Price Action

PAAS' lackluster technical performance doesn't dissuade bulls

by 12/7/2011 2:41 PM
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Bullish bettors have shown a fondness for Pan American Silver (PAAS - 24.33) calls today, as more than 4,900 of these options have changed hands so far, which is quadruple the equity's expected intraday call volume. Over 2,200 calls were traded at the deep-out-of-the money January 2012 34 strike -- nearly all of them at the ask price, suggesting they were bought. This option is currently home to open interest of 1,123 contracts, making it safe to say that new positions are being initiated here today.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for PAAS checks in at 0.46, confirming that calls more than double puts among options slated to expire within three months. This ratio ranks in the 8th percentile of its annual range, conveying that short-term options traders have been more bullishly aligned toward the stock just 8% of the time during the past 12 months.

Echoing this positive sentiment toward the platinum and precious metals concern is its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio, which stands at a whopping 35.92, indicating that calls bought to open have outnumbered puts by almost 36 to one during the past two weeks. In fact, this ratio is just one percentage point shy of annual high, signaling that traders are snapping up bullish options over bearish at a near-peak clip.

Elsewhere, short interest on PAAS declined by more than 21% during the past two reporting periods. These bearish bets make up a paltry 1.22% of the equity's float. At the stock's average daily trading volume, it would take just one day to buy back these shorted shares.

Technically, PAAS has shed roughly 41% of its value year-to-date, and has underperformed the broader S&P 500 Index (SPX) by around 31% over the past 60 sessions. On the charts, the stock continues to struggle against troublesome resistance at its 10-week and 40-week moving averages.

At last check, PAAS is down about 1.5% and is trading at $24.33.


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