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Call traders converged on flash memory maker SanDisk Corporation (SNDK - 36.31) yesterday, as the shares enjoyed what some attributed to a halo lift from tech titan Apple Inc. (AAPL). By the time the dust settled, SNDK had seen about 38,000 calls change hands -- more than twice the number of SNDK puts traded, and roughly three times the stock's average daily call activity.
Jumping right in, it looks like eleventh-hour traders bought to open the stock's June 36 and June 37 calls, which saw around 9,700 and 5,600 contracts cross the tape, respectively. The majority of the soon-to-expire calls traded at the ask price, and call open interest at the near-the-money strikes increased overnight, confirming the initiation of new short-term positions. By purchasing the calls to open, the buyers are betting on SNDK to finish the week north of the respective strikes, and by enough to cover the premium paid.
Meanwhile, the deep out-of-the-money July 43 call saw more than 3,600 contracts change hands -- mostly at the bid price, suggesting they were sold. Plus, call open interest at the soon-to-be front-month strike swelled by more than 3,200 contracts overnight, pointing to sell-to-open activity. By writing the calls to open, the sellers are expecting SNDK to remain south of the $43 level over the next few weeks. In the best-case scenario, the calls will expire worthless, and the sellers can pocket the initial premium received.
From a broader sentiment standpoint, most traders have been employing SNDK calls for more traditional reasons, as witnessed by the growing trend on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where SNDK sports a 10-day call/put volume ratio of 2.04. This ratio registers in the 71st annual percentile, pointing to a healthier-than-usual appetite for long calls over puts during the past couple of weeks.
In the same vein, the stock currently boasts 12 "strong buys" and three "buy" endorsements from analysts, compared to six "holds" and just one "sell" suggestion.
On the charts, the shares of SNDK have advanced 11.1% in June, but not before tagging a three-year low of $30.99 at the start of the month. In today's session, the equity has extended yesterday's rally, tacking on 1% to flirt with the $36.31 level. What's more, the security is now on pace to end the week atop its 10-week moving average for the first time since late March.