Traders Grow Optimistic as AOL Inc. (AOL) Jumps on Earnings

AOL, Inc. (AOL) bested first-quarter profit and sales expectations

May 8, 2015 at 10:49 AM
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AOL, Inc. (NYSE:AOL) is breaking out this morning, up 11.1% at $43.75 on stronger-than-expected quarterly results -- which isn't a huge surprise, given the security's post-earnings history. At the same time, the media stock's options pits have gone into overdrive, with intraday volume running at 11 times the normal amount.

AOL's most active strike is the July 40 put, where new positions are being initiated. However, these likely aren't bearish in nature, as data suggests the puts are being sold to open. In other words, the put writers are counting on the $40 level to act as support from now through July expiration.

This confidence isn't necessarily shared elsewhere on the Street. For starters, 5.5% of AOL's float is sold short, which would take more than one week to repurchase, at the stock's average trading levels. Also, over half of the analysts tracking the shares consider them a "hold" or worse, and their consensus 12-month price target of $45.65 is just a chip-shot away.

Ultimately, this skepticism could be a boon to AOL, Inc. (NYSE:AOL). Should the stock continue to run higher, potential short-covering activity and/or bullish brokerage attention could provide an additional lift.

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