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Bullish Options Players Zero In on Starwood Hotels & Resorts

Front-month call volume swells on HOT

by 3/12/2012 9:56 AM
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Starwood Hotels & Resorts Worldwide, Inc. (HOT - 55.23) saw a rise in bullish options activity on Friday, as more than 9,900 calls changed hands, reflecting five times the equity's average daily volume. Close to 2,300 of these calls were traded at the near-the-money March 55 strike -- over half of them at the ask price, suggesting they were bought. Open interest at this strike climbed by 286 contracts over the weekend, indicating that some of the volume consisted of newly opened positions. This option is now home to peak call open interest of 1,505 contracts. By purchasing these calls to open, investors are betting that the stock will continue its trek north of $55 by the time front-month options expire.

This preference for calls over puts is more of the same for HOT. The 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio sits at 12.86, confirming that calls bought to open have outnumbered puts by nearly 13 to one during the past couple of weeks. In fact, this ratio is just two percentage points shy of a yearly peak, which means that traders have been snapping up bullish bets over bearish at an almost annual-high pace.

The majority of analysts following the hotel titan seem to share this optimistic attitude toward HOT. According to Zacks, the equity boasts 13 "strong buys" and one "buy" endorsement, compared to seven "holds" and not a single "sell" recommendation.

On the technical front, HOT is ahead by roughly 15% year-to-date, and has outperformed the broader S&P 500 Index (SPX) by around 8% during the past 60 sessions. A look at the charts shows that the stock has maintained its perch atop support at its 10-week moving average since early January.

In the first hour of the session, the equity is up about 0.6% to trade at $55.23.


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