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Since touching a three-year high of $2.64 in mid-August, the shares of Sirius XM Radio Inc (NASDAQ:SIRI - 2.42) have lost a bit of steam. Nevertheless, the stock attracted its fair share of option bulls on Tuesday, with speculators honing in on December-dated calls.
Most notably, investors established new positions at the December 2.50 call, which saw open interest soar by about 3,400 contracts overnight. Plus, the majority of the back-month calls traded at the ask price, confirming our suspicions of buy-to-open activity.
By purchasing the calls to open, the buyers are betting on SIRI to resume its longer-term uptrend and retake the $2.50 level. More specifically, the volume-weighted average price of the calls was $0.12, meaning the buyers will reap a reward if SIRI topples the $2.62 level (strike plus premium paid) within the next few months.
However, options traders have actually been picking up puts at a faster-than-usual pace, as evidenced by the latest data from the major exchanges. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SIRI's 10-day put/call volume ratio of 0.15 ranks in the 69th percentile of its annual range. Or, in simpler terms, option traders have initiated bearish bets over bullish at an accelerated clip during the past couple of weeks.
As a result, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.62 stands higher than 83% of all other readings of the past year. In other words, near-term options players are more put-heavy than usual right now.
Echoing that pessimism, short interest grew 9% during the past month, and now accounts for 8.8% of SIRI's total available float. In fact, at the equity's average daily trading volume, it would take nearly six sessions to buy back these bearish bets.
Right out of the gate, SIRI has surrendered 0.4%, but could find support atop its 10-week moving average, which -- along with its 100-week cohort -- has served as a foothold for the better part of a year.