Albemarle Stock Analyst Responds to Chile Update

Albemarle call options have been very popular

Nov 9, 2018 at 9:16 AM
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Albemarle Corporation (NYSE:ALB) just announced it's postponing two lithium production projects in Chile, and brokerage firm Berenberg responded by lowering its price target on ALB stock to $130 from $150. This still represents major upside -- nearly 23% to be exact -- from the shares' Thursday closing price of $105.87.

Looking back further, the equity got off to a rough start to 2018, but more recently has been trending higher since finding support near the $92 level through the summer months. Adding to the bullish picture is the rising 50-day moving average, which is right near the round $100 level.

It would seem a number of options traders have been speculating on upside for ALB. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the stock with a 10-day call/put volume ratio of 12.20, showing long calls have outpaced puts by more than 12-to-1. This reading also ranks in the 93rd annual percentile, so such heavy call activity is very rare.

At the same time, it's likely some of this call trading was from Albemarle short sellers looking for an options hedge. These bears control almost 12% of the total float, and it'd take them nine sessions to totally cover their positions, based on average daily volumes. As such, a short squeeze is always a possibility, should ALB gain momentum on the charts.

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