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Sprint Nextel Corporation (NYSE:S - 5.57) has been on the bullish radar today, as approximately 10,000 calls have crossed the tape so far -- about double the security's anticipated intraday call volume. By comparison, just over 1,000 puts have been exchanged. Leading the pack is the February 6 call, where nearly 5,350 contracts have traded at a volume-weighted average price (VWAP) of $0.07.
It appears the bulk of these near-the-money calls changed hands at the ask price, suggesting they were bought. Meanwhile, implied volatility was last seen 1.8 percentage points higher, hinting at the initiation of new positions. If these contracts were, in fact, bought to open, today's speculators are betting on S to rise north of $6.07 (strike price plus the VWAP) by February expiration. This represents a 9% increase over current levels, and would propel the stock into new annual-high territory. Should the shares fall short of this goal, the most these bulls stand to lose is the initial premium paid.
Today's preference for calls over puts is a stark contrast to the equity's current trend. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 10-day put/call volume ratio of 2.43 for S, confirming puts bought to open have more than doubled calls during the past two weeks. In fact, this ratio is just two percentage points shy of a bearish peak, meaning traders have been snapping up puts over calls at a near annual-high pace.
This pessimistic attitude is somewhat surprising for a stock that has soared about 138% year-to-date. What's more, S continues to trade atop its 20-week moving average, a trendline that hasn't been breached since May. At last check, the equity has inched 0.1% higher today to hover at $5.57.