Options Activity for Dell (DELL), Advanced Micro Devices (AMD) and HSBC Holdings (HBC)
Wednesday, November 17, 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 put trading on Dell (DELL), while call trading jumped on Advanced Micro Devices (AMD) and HSBC Holdings (HBC). 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.

Advanced Micro Devices (AMD)

Options trading was brisk on Advanced Micro Devices Inc. (AMD) on Tuesday, as more than 82,600 contracts crossed the tape. This surge in volume was more than five times the stock's average daily trading volume of 15,657 contracts, according to data from WhatsTrading.com. In addition, traders were feeling rather optimistic, as 82% of the volume changed hands on the call side.



Calls have been the options of choice when it comes to AMD. The International Securities Exchange (ISE) reports that 6.3 calls have been purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 95% of all those taken during the past 52 weeks.

Meanwhile, the put/call open interest ratio (SOIR) for AMD has slightly bullish leanings, as it comes in at 0.72, which is in the 43rd percentile rank. In other words, short-term options players are more optimistically aligned than usual toward the shares.

Elsewhere, we find that short sellers are starting to unload their bearish bets. During the past month, the number of AMD shares sold short dropped by 15% to 57.7 million. Nevertheless, this accumulation of pessimistic positions still accounts for 8.5% of the company's total float.

Wall Street has its doubts about the firm. According to Zacks, the stock has earned six "buy" ratings, 17 "holds," and five "sell" ratings. In fact, just this morning JMP Securities downgraded the stock to "market perform" from "market outperform," citing competitive and end-market headwinds.

Technically speaking, the shares of AMD are down more than 23% since the beginning of the year. The security recently bounced off support in the 5.50 region and climbed back above resistance at its 10-week and 20-week moving averages, but is still facing staunch resistance at the 10 level.



Dell (DELL)

Dell Inc. (DELL) was the center of some heavy options trading on Tuesday, as more than 100,300 contracts crossed the tape. This jump in volume was more than four times the stock's average daily trading volume of 22,581 contracts, according to data from WhatsTrading.com. Furthermore, options players are rather skeptical of the shares, as 92% of the volume crossed the tape on the put side.



Traders could be lining up their bets ahead of the company's earnings report, slated for release on Thursday, Nov. 18. Analysts are expecting a profit of 33 cents per share, which is an improvement over the company's profit of 23 cents per share for the same period a year ago. Historically, the company has surpassed the consensus estimate in three of the past four quarters.

The ISE and Chicago Board Options Exchange (CBOE) report an increase in put trading recently. DELL's 10-day put/call volume ratio comes in at 0.90, which is higher than 88% of all those taken during the past 52 weeks.

In addition, the SOIR for DELL comes in at 0.78, which is higher than 63% of all those taken during the past 52 weeks. In other words, short-term options players have been more pessimistically aligned toward the shares only 37% of the time during the past 52 weeks.

Wall Street also has a slight bearish bias when it comes to DELL. According to Zacks, the stock has earned 15 "buy" ratings, 15 "holds," and three "sells."

From a technical perspective, the shares of DELL are down more than 6% since the beginning of the year. The security has been trapped in a sideways trading channel between resistance at the 17.50 level and support at the 11.50 level since June 2009.



It appears that expectations are extremely low for the company's earnings report. A stronger-than-expected announcement could push the shares higher if some of the bears jump ship.

HSBC Holdings (HBC)

Options players focused on HSBC Holdings plc (HBC) yesterday, as more than 86,900 contracts changed hands. This surge in volume was more than seven times the stock's average daily trading volume of 11,308 contracts, according to data from WhatsTrading.com. What's more, roughly 85% of the volume changed hands on the call side.



Call trading has been on the rise on the ISE and CBOE recently. During the past two trading weeks, 1.2 HBC calls have been purchased to open for every one put purchased to open during the past 10 trading sessions. This ratio of calls to puts is higher than 82% of all those taken during the past 52 weeks.

What's more, the SOIR for HBC comes in at 1.24, which is lower than 95% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 5% of the time during the past 52 weeks.

Short interest has also deflated recently. During the past month, the number of HBC shares sold short dropped by 21% to 3.8 million, representing well under 1% of the company's total float.

Meanwhile, Wall Street is smitten with the shares. According to Zacks, the stock has earned six "strong buy" ratings and just two "hold" ratings.

Technically speaking, the shares of HBC are down more than 7% since the beginning of the year. However, since finding a near-term bottom at the 44 level in May, the stock has climbed higher along the support of its 10-week and 20-week moving averages.





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