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AOL, Inc.'s (AOL) May 42 call is seeing buy-to-open action
AOL, Inc. (NYSE:AOL) is off 0.5% this afternoon at $39.62, but options traders remain optimistic -- as they have been on a number of Internet names. At last check, calls were flying off the shelves at 18 times the usual intraday pace, and the stock's 30-day at-the-money implied volatility has soared 14.2% to 48.5%, indicating elevated demand for short-term strikes.
Seeing the most action by far is the May 42 call, where more than 4,500 contracts have changed hands. All signs point to buy-to-open activity, meaning speculators anticipate AOL will take out $42 by the close on Friday, May 15, when the soon-to-be front-month options cease trading.
Along similar lines, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at an annual low of 0.23. In other words, call open interest outweighs put open interest by a historic margin, among options expiring in the next three months.
However, not everyone's so confident in AOL. Over half of the analysts tracking the shares consider them a "hold" or worse. Also, 5.5% of the equity's float is sold short, representing almost five times its typical daily trading levels.
Technically speaking, AOL, Inc. (NYSE:AOL) is on pace for a second straight finish above its 20-day moving average -- the first time that's happened since mid-March. What's more, it appears the 10- and 20-day trendlines are on the verge of a bullish cross, which is promising in the short term. If AOL can capitalize on this technical set-up, a round of upgrades and/or short-covering activity could provide a tailwind.