Call Volume Spikes as Fiat Chrysler Automobiles NV (FCAU) Hits New High

Fiat Chrysler Automobiles NV's (FCAU) $1 billion U.S. investment plan received praise from President-elect Donald Trump

Jan 9, 2017 at 11:08 AM
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Fiat Chrysler Automobiles NV (NYSE:FCAU) is just the latest automaker to find its name featured on President-elect Donald Trump's Twitter feed. Specifically, Trump praised Fiat Chrysler's announcement that it will invest $1 billion -- and create 2,000 jobs -- to revamp factories in Ohio and Michigan. At last check, FCAU stock was trading up 1.3% at $10.56 -- fresh off a new annual high of $10.60 -- and its options pits are bustling, with volume running at 1.6 times what's typically seen at this point in the day.

Although volume is still relatively light on an absolute basis, calls are leading puts by a 3-to-1 margin. This call-skewed backdrop is just more of the same for FCAU, though, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In fact, speculators at these major options exchanges have bought to open 3,238 FCAU calls in the last 10 sessions, compared to 285 puts. Plus, the resultant 10-day call/put volume ratio of 11.36 ranks just 15 percentage points from a 52-week peak.

Echoing this is FCAU's Schaeffer's put/call open interest ratio (SOIR) of 0.29. Not only does this show that calls more than triple puts among options expiring in three months or less, but it ranks below 99% of all comparable readings taken in the past 12 months. Simply stated, short-term speculators have rarely been more call-heavy toward FCAU stock than they are now.

Drilling down, the stock's back-month February 11 call has seen the largest rise in open interest over the past 10 trading days, with more than 10,500 contracts added. According to Trade-Alert, the bulk of the action occurred last Friday, when one speculator sold to close her February 9 calls and rolled them up to the 11 strike -- betting on additional gains for FCAU over the next six weeks. Open interest translations over the weekend support this theory.

Outside of the options pits, there's still plenty of skepticism levied toward FCAU -- which could help support the shares in the near term. Short interest, for instance, jumped 23% in the most recent reporting period. And while less than 6% of the stock's float is sold short, it would still take more than a week to cover these bearish bets, at the security's average pace of trading. Plus, more than half of analysts maintain a "hold" or worse rating on the stock, while J.P. Morgan Securities lowered its price target to €8.50 from €9.20 overnight.

Technically, though, today's positive price action is just more of the same for shares of Fiat Chrysler Automobiles NV (NYSE:FCAU). In 2017 alone, the stock has added 16% -- and is up more than 65% over the past six months. Should the shares continue their trek into annual-high territory, some short covering and/or a fresh round of bullish brokerage attention could help fuel FCAU's fire.

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