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Sirius XM Radio Sees Increased Bullish Speculation

Call volume has been building on SIRI for the past several weeks

by 7/9/2012 1:18 PM
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Although overall option volume in the Sirius XM Radio Inc (NASDAQ:SIRI - 2.06) has dried up somewhat in recent weeks, some fans of the satellite radio pioneer have been speculating on continued upside by buying calls.

Since June options expiration, overall call open interest has risen by 45%, while total put open interest has climbed just under 15%. In turn, Schaeffer's put/call open interest ratio (SOIR) for SIRI has moved from an annual high of 0.78 to its current perch of 0.61. This reading is still higher than 87% of the past year's readings, however, meaning there could be further bearish sentiment left to unwind.

A similar trend has taken shape on the volume front. The 10-day call/put volume ratio of buy-to-open activity at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 10.88. In other words, nearly 11 calls have been bought to open during the last two weeks for every single put. While it's no surprise that calls outpace puts (given the stock's low trading price), it's notable that the 50-day call/put volume ratio weighs in at 6.66. Recent speculative activity has therefore shown a more notable preference for long calls.

Today's most-active option in SIRI pits is the July 2-strike call -- this is currently home to peak open interest in the front-month series, with nearly 27,000 calls in residence. With the stock trading higher today, it is possible some traders are attempting to sell existing long calls to close and take profits off the table.

SIRI lifted expectations today for growth in its subscriber base as well as overall revenue. The company expects net subscriber growth to close in on 1.6 million while revenue is expected to near $3.4 billion (up from 1.5 million and $3.3 billion, respectively). The stock is up roughly 1% midday and is taking on overhead technical resistance at its 80-day moving average. This trendline, perched at $2.08, has acted as solid resistance since early May. Last Thursday, SIRI closed right at this moving average before moving back below it during Friday's market pullback.


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