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Longer-Term Call Activity Climbs on Navistar International

NAV call volume rises, despite weak technical performance

by 3/22/2012 1:54 PM
Stocks quoted in this article:

Bullish traders have set their sights on Navistar International Corporation (NAV - 41.03) today, as north of 2,900 calls have changed hands so far, which is more than three times the equity's expected intraday volume. At least 1,547 of these calls have crossed at the July 50 strike -- nearly all of them at the ask price, suggesting they were purchased. This option currently carries open interest of just 404 contracts, pointing to a fresh batch of new positions.

This upswing in call volume is business as usual for NAV. The 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio rests at 3.01, indicating that traders have bought to open three calls for every put over the last 10 sessions. This ratio registers in the 59th percentile of its annual range, signaling that investors have been scooping up bullish options over bearish at an accelerated clip.

However, it's worth mentioning that short interest on NAV skyrocketed by almost 40% during the last two reporting periods, and now represents more than 5% of the equity's float. This raises the possibility that some of the recent buy-to-open call volume is the result of hedging activity by short sellers.

NAV has been a technical laggard lately, having shed more than 36% on a year-over-year basis, and underperforming the broader S&P 500 Index (SPX) by around 11% during the past 40 days. On the charts, the stock is poised to close a fourth straight week beneath its 10-week trendline, which had previously served as support since early January.

At last look, NAV is down by over 1% to trade at $41.03.


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