United Technologies Corporation (UTX) Call Players Eye a Quick Bounce

United Technologies Corporation (NYSE:UTX) is leading the Dow lower today on news it is exiting the helicopter business

by Karee Venema

Published on Jun 15, 2015 at 11:29 AM
Updated on Jun 15, 2015 at 11:30 AM

Overseas anxiety is pressuring the Dow today, with 29 of the index's 30 components in the red at last check. United Technologies Corporation (NYSE:UTX) is blazing the path lower -- down 1.9% -- after the aerospace issue said it is throwing in the towel on the helicopter business -- and either selling or spinning off its Sikorsky Aircraft division -- at its annual analyst and investor day. The negative price action has done little to shake the confidence of option traders, who are scooping up calls at a rate 1.8 times the average intraday pace.

Drilling down, the stock's June 118 call has garnered the majority of the attention. It looks as if speculators are buying to open the calls at a volume-weighted average price (VWAP) of $0.15, meaning they expect UTX to rally north of breakeven at $118.15 (strike plus the VWAP) by this Friday's close, when front-month options expire. Amid today's decline, delta on the call has dropped to 0.17 from 0.45 at last Friday's close, indicating a less than 2-in-5 chance of an in-the-money finish.

Today's accelerated call activity is just more of the same for the blue chip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), UTX's 10-day call/put volume ratio of 3.66 ranks in the 84th annual percentile. Echoing this is the equity's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.34, which suggests near-the-money call open interest almost triples put open interest in the June-dated series.

Technically speaking, the stock has had quite a ride since hitting an annual low of $97.30 in mid-October. Specifically, the shares have added 18.7% -- and tagged a Feb. 20 all-time high of $124.45 along the way. More recently, UTX has been consolidating in the $116-$117 region, but thanks to today's drop that has the security lingering near $115.50, United Technologies Corporation (NYSE:UTX) could be on track to notch its first close south of its 160-day moving average since early December.

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