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Call Volume Ramps Up on Computer Sciences Corporation

Options players go after CSC calls, despite weak technical performance

by 12/30/2011 10:27 AM
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Call players showed an interest in Computer Sciences Corporation (CSC - 23.68) on Thursday, as more than 3,700 of these options changed hands, which was double the equity's average daily volume. Over 2,400 calls were traded at the out-of-the-money January 2012 27.50 strike -- all of them at the ask price, pointing to buyer-fueled activity. Open interest on this option rose by 1,077 contracts overnight, making it safe to say that a large portion of the volume at this strike consisted of newly opened positions. This call now carries open interest of 4,000 contracts.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for CSC sits at 0.38, confirming that calls nearly triple puts among options set to expire within three months. This ratio registers in the 16th percentile of its annual range, signaling that short-term options players have been more bullishly aligned toward the stock just 16% of the time during the past 12 months.

However, open interest on CSC climbed by 8.45% during the past two reporting periods, which could indicate that some of the recent call volume might be attributed to short sellers looking to hedge their bets. Either way, the bearish plays account for 4.16% of the equity's float. It would take almost three days to buy back these shorted shares, at the stock's average daily trading volume.

On the technical front, CSC has shed more than 52% of its value year-to-date, and has underperformed the broader S&P 500 Index (SPX) by roughly 23% during the past 40 sessions. A look at the charts shows that the stock continues to hover beneath its 10-week and 20-week moving averages, both of which have served as resistance for most of 2011.

In the early morning hours of the session, CSC remains nearly flat with yesterday's close of $23.68.


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