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Upgrade Lures Front-Month Call Buyers to LSI Corp.

Traders are purchasing LSI's January 2012 6-strike call

by 1/3/2012 10:58 AM
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The shares of LSI Corporation (LSI - 6.15) have kicked off the year on a high note, riding broad-market tailwinds and a bullish brokerage note into the black. Specifically, Barclays this morning weighed in on a few tech stocks, upgrading LSI to "overweight" from "equal weight." As such, LSI has been a popular target among early call traders.

At last check, the stock has already seen roughly 4,400 calls cross the tape -- far surpassing its average daily volume of fewer than 300 calls. On the flip side, fewer than 50 LSI puts have changed hands thus far.

Digging even deeper, we find that nearly all of the action has centered on the at-the-money January 2012 6-strike call, which has seen almost 4,300 contracts traded on open interest of fewer than 2,100, pointing to an influx of new positions. Plus, 100% of the front-month calls have crossed at the ask price, suggesting they were bought. By purchasing the calls to open, the buyers are expecting LSI to extend its journey north of $6 through the next few weeks.

From a broader sentiment standpoint, though, it seems the short-term options crowd is actually more put-heavy than usual on LSI at the moment. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.79 registers in the 63rd annual percentile. Echoing that skeptical skew, Zacks reports that less than half of the analysts following the security deem it worthy of a "buy" or better rating.

In early trading, LSI has muscled 3.4% higher to wink at the $6.15 level. While it's still too early to call, the equity is on pace to end the holiday-shortened week atop its 20-week moving average for the first time since July.


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