Options Activity for AnnTaylor Stores (ANN), eBay (EBAY), and United Parcel Service (UPS)
Wednesday, December 01, 2010



I hope that your trading is going well, as I know that members of S.O.M.E. are making the most of the market movements and their returns.



Today's newsletter includes a look at a rise in call trading on AnnTaylor Stores (ANN), eBay (EBAY), and United Parcel Service (UPS).The purpose of this newsletter is to focus on stocks seeing heavy options trading and gives you a unique insight into each stock's sentiment backdrop.

AnnTaylor Stores (ANN)

Women's retailer AnnTaylor Stores Inc. (ANN) was the center of some heavy call trading on Tuesday, as more than 10,600 contracts crossed the tape. This surge in call volume was more than seven times the stock's average daily call volume, according to data from WhatsTrading.com. In addition, roughly 81% of the volume changed hands at the ask price, indicating that most of these contracts were purchased.



However, it appears that this rush to purchase calls runs counter to the recent trend. The International Securities Exchange (ISE) reports that 4.2 puts have been purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 90% of all those taken during the past 52 weeks.

In addition, the put/call open interest ratio (SOIR) for ANN comes in at 1.37, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 92% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 7% of the time during the past 12 months.

Short sellers are also attracted to the shares. During the past month, the number of ANN shares sold short increased by 32% to 9.8 million. This accumulation of bearish bets accounts for 20% of the company's total float and is six times the stock's average daily trading volume. An unwinding of these pessimistic positions could fuel a continued rally in the shares.

Despite this wealth of pessimistic sentiment, ANN has Wall Street in its corner. According to Zacks, the stock has earned nine "buy" ratings and six "holds."

Technically speaking, the shares of ANN are up more than 97% since the beginning of the year. The equity has been in a sharp uptrend since September, when it put in a bottom at the 15 level and reconquered its 10-week moving average. A bullish shift in sentiment among options players, or a short-covering spree, could create a fresh wave of buying pressure for the security.



eBay (EBAY) eBay Inc. (EBAY) and other online retailers are getting a boost today after a strong Cyber Monday report released last night. Online same-store sales, which measure Web retailers active for more than a year, rose 36% from the prior year, according to ChannelAdvisor. The firm stated that same-store sales for their retail clients selling wares on Amazon.com (AMZN) rose 98.1%, while those on eBay rose 14.6%.

Ahead of this data, traders flocked to EBAY's options. More than 48,800 contracts changed hands on Tuesday, which is more than double the stock's average daily trading volume of 19,043, according to data from WhatsTrading.com. In addition, approximately 59% of the volume changed hands on the call side.



However, overall, options players remain skeptical of the shares. According to the ISE, 1.45 puts were purchased for every one call purchased to open during the past two trading weeks. This ratio of puts to calls is higher than 93% of all those taken during the past 12 months.

Furthermore, the SOIR for EBAY comes in at 1.05, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 77% of all those taken during the past 12 months. In other words, short-term options players have been more pessimistically aligned toward the shares only 23% of the time during the past 52 weeks.

Wall Street is split in its outlook. According to Zacks, the stock has earned 15 "buy" ratings, 12 "holds," and one "strong sell." As such, there is ample room for potential upgrades following the positive sales report.

From a technical perspective, the security has gained more than 23% since the beginning of 2010. The stock has recently rallied along the support of its 10-week moving average, but is currently pulling back to support at this critical trendline, located at the 29 level.



United Parcel Service (UPS)

Options players flocked to the shares of United Parcel Service Inc. (UPS) on Tuesday, as more than 42,300 contracts changed hands. This surge in volume was more than three times the stock's average daily trading volume of 13,182 contracts, according to data from WhatsTrading.com. In addition, traders were feeling optimistic, as 81% of the volume changed hands on the call side.



However, there is still ample room for optimism to grow, as the SOIR for UPS comes in at 0.97. This ratio is higher than 99% of all those taken during the past year, indicating that short-term traders have been more pessimistically aligned toward the shares only 1% of the time.

On the other hand, Wall Street is smitten. According to Zacks, the stock has earned 17 "buy" ratings and just six "hold" ratings. Technically speaking, the shares of UPS are up more than 22% since the beginning of the year. The security has enjoyed a stellar run higher along the support of its 10-week and 20-week moving averages since March 2009.



Success is simple. Do what's right, the right way, at the right time.




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