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Options Players Satisfy Their Hunger With Jack in the Box Puts

JACK gets a rare boost in front-month put volume

by 2/27/2012 9:49 AM
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Fast-food maven Jack in the Box Inc. (JACK - 22.97) saw a rare surge in put volume on Friday, as 1,051 of these options crossed the tape, which was seven times above the norm. The bulk of the action centered around the near-the-money March 22.50 strike, where 1,020 puts were exchanged -- just over half of them at the bid price, suggesting they were sold. Open interest at this strike declined by 88 contracts over the weekend, pointing to liquidation activity. This option is now home to peak put open interest of 1,149 contracts.

However, Friday's uptick in put volume runs counter to JACK's current trend. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day call/put volume ratio of 2.44 for the equity. In other words, traders have bought to open more than two calls for every put during the past two weeks.

What's more, the Schaeffer's put/call open interest ratio (SOIR) for JACK stands at 0.64, confirming that calls comfortably outnumber puts among options expiring within three months. This ratio ranks in the 44th percentile of its annual range, which means that near-term options players are slightly more call-heavy toward the stock than usual.

Meanwhile, short interest on the quick-service eatery rose by 3.69% during the past two reporting periods, and now accounts for a healthy 8.76% of JACK's float. This implies that some of the recent call volume could be attributed to short sellers looking to hedge their bearish bets. Either way, it would take more than 14 days to buy back these shorted shares, at the stock's average daily trading volume.

On the technical front, JACK has gained more than 10% year-to-date. A look at the charts shows that the stock is on pace to finish the month above resistance at its 50-month moving average for the first time since May 2009. In fact, the equity tagged a new multi-year high on Feb. 22 after reporting stronger-than-expected fiscal first-quarter earnings.

In the first hour of the session, however, JACK is down about 1.8% to trade at $22.97.


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