Universal Display Corporation (OLED) Traders Buck Bearish Trend

Universal Display Corporation (OLED) has tacked on nearly 8% today

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Published on Jan 26, 2015 at 2:50 PM
Updated on Apr 20, 2015 at 5:32 PM

Unlike the broader market, Universal Display Corporation (NASDAQ:OLED) is rallying, up roughly 5.3% this afternoon at $29.69 on news of a license agreement with LG Display. These developments aren't lost on traders, who are swarming are the stock's options pits, as overall volume has spiked to 11 times what's typically seen at this point in the session. Meanwhile, OLED's 30-day at-the-money implied volatility has rocketed 23.6% to 45.3%.

Digging deeper, each of the five most active OLED options belongs to the front-month series. In the driver's seat is the February 33 put, where traders are buying to open positions in the hopes that the stock will quickly reverse lower. Not only are the contracts currently in the money, but OLED has pared its early gains and is now sitting below the at-expiration breakeven mark of $31.20 -- or the strike, less the volume-weighted average price of $1.80.

Today's activity is unusual on a couple of levels. For one, OLED shares have generally struggled on the charts; as of last night's close, they were down more than 10% on a year-over-year basis. For another, calls have been the options of choice in recent months, per the equity's 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 4.45 -- which ranks in the 98th annual percentile.

This doesn't mean today's skeptics are alone. In fact, 26.7% of OLED's float is sold short, which would take more than five weeks to buy back, given the stock's typical daily trading levels. If today's positive momentum continues, though, a capitulation among the shorts could buoy Universal Display Corporation (NASDAQ:OLED) even further.


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