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Put Volume Spikes on Ciena Corporation in the Options Pits

But are some traders betting on round-number support?

by 12/16/2011 12:05 PM
Stocks quoted in this article:

Ciena Corporation (CIEN - 10.86) has seen an influx of put volume today, as roughly 21,000 of these options have crossed the tape so far, reflecting 12 times the equity's expected intraday volume. Nearly 13,900 puts have traded at the out-of-the-money January 2012 10 strike -- most of them at the bid price, pointing to seller-drive activity. This option currently carries peak back-month put open interest of 23,334 contracts, making it hard to say with certainty whether new positions are being initiated in this session.

Examining CIEN's sentiment backdrop, it appears that there is still plenty of positive sentiment lingering around the equity. The Schaeffer's put/call open interest ratio (SOIR) rests at 0.70, indicating that calls outnumber puts among options expiring within three months. In fact, this ratio registers in only the 10th percentile of its annual range, meaning that short-term options players have been more bullishly oriented toward the stock just 10% of the time during the past 12 months.

What's more, CIEN's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 1.81. This confirms that calls bought to open have nearly doubled puts during couple of weeks.

Meanwhile, although short interest on CIEN edged down by 2.35% over the past two reporting periods, these bearish plays still make up a hefty 27.81% of the equity's float. This could suggest that some of the recent call volume may be the result of hedging activity by short sellers. At the stock's average daily trading volume, it would take more than a week to buy back these shorted shares.

On the technical front, CIEN has shed more than 48% of its value year-to-date, and has underperformed the broader S&P 500 Index (SPX) by almost 18% over the past 20 sessions. On the charts, the stock is on pace to end a fourth consecutive week under familiar resistance at its 10-week moving average. However, the stock has not closed beneath the $10 level since July of 2009, which may mean that some speculators are betting on support by selling puts at the January 10 strike.

At last check, CIEN is up about 2% and is trading at $10.86.


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