AOL Inc. (AOL) Call Buyers Place Optimistic Bets

AOL, Inc.'s (AOL) May 42 call is seeing buy-to-open action

Apr 16, 2015 at 1:47 PM
facebook twitter linkedin

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.


Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 



Special Offers from Schaeffer's Trading Partners