Options Activity for Amgen (AMGN), Electronic Arts (ERTS) and WellPoint Inc. (WLP)
Tuesday, October 05, 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 an unusual rise in put trading on Amgen (AMGN), while call trading is climbing for Electronic Arts (ERTS) and WellPoint Inc. (WLP). 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.

Amgen (AMGN)

Amgen Inc. (AMGN) was the focus of some heavy options trading on Monday, as more than 26,900 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 12,833 contracts, according to data from WhatsTrading.com. In addition, traders were feeling quite bearish, as 70% of the volume has changed hands on the put side.



This volume runs counter to the call trading that has been seen on the International Securities Exchange (ISE) recently. During the past two trading weeks, 1.7 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 61% of all those taken during the past 12 months, pointing to a rising optimism.

Meanwhile, the Schaeffer's put/call open interest ratio (SOIR) for AMGN comes in at 0.54, as call open interest nearly doubles put open interest among options slated to expire in less than three months. This ratio is lower than 91% of all those taken during the past 12 months. In other words, short-term options players have been more optimistically aligned toward the shares only 9% of the time during the past 52 weeks.

Wall Street is also enamored of the stock. According to Zacks, the stock has earned 22 "buy" ratings, eight "holds," and just one "sell."

Technically speaking, the shares of AMGN are down about 2.7% since the beginning of the year. However, the security has bounced back from support in the 50 area and is using its 10-day and 20-day moving averages as support as it attempts to pull higher.



Electronic Arts (ERTS)

Options players jumped on Electronic Arts Inc. (ERTS) on Monday, as more than 25,100 contracts crossed the tape. This surge in volume was more than five times the stock's average daily trading volume of 4,381 contracts, according to data from WhatsTrading.com. In addition, options players have high hopes for the security, as 89% of the volume changed hands on the call side.



In fact, call trading has been on the rise on the ISE recently. During the past 10 trading sessions, five calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 55% of all those taken during the past year.

However, overall sentiment is far from an optimistic extreme. In fact, there is ample room for optimism to grow. The SOIR for ERTS comes in at 0.76, which is higher than 97% of all those taken during the past 12 months. In other words, short-term options speculators have been more pessimistically aligned toward the shares only 3% of the time during the past 12 months.

Meanwhile, short sellers are adding to their bearish bets. During the past month, the number of ERTS shares sold short increased by nearly 37% to 19.8 million. This accumulation of bearish bets accounts for 6% of the company's float and is 5.5 times the stock's average daily trading volume.

Furthermore, Wall Street is split on ERTS. According to Zacks, the stock has earned 13 "buy" ratings, 10 "holds," and two "strong sells."

Technically speaking, the shares of ERTS are down 4% since the beginning of the year. However, the stock has bounced back from its July low in the 14 region and is now sitting on support at its 10-day and 20-day moving averages.



WellPoint Inc. (WLP)

Options trading was brisk on WellPoint Inc. (WLP) on Monday, as more than 17,200 contracts changed hands. This jump in volume was more than double the stock's average daily trading volume of 7,732 contracts, according to data from WhatsTrading.com. Furthermore, roughly 61% of the volume crossed the tape on the call side.



In fact, call trading on WLP has spiked significantly higher on the ISE. During the past two trading weeks, nearly eight calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 91% of all those taken during the past 12 months.

On the other hand, sentiment is still sitting in the bears' corner, as the SOIR for WLP comes in at 0.82, which is higher than 93% 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 7% of the time during the past 12 months.

Meanwhile, Wall Street is smitten with the shares at the moment. According to Zacks, the stock has earned 14 "buy" ratings and seven "holds." This configuration leaves little room for upgrades and ample room for potential downgrades.

From a technical perspective, the shares of WLP are down nearly 6% since the beginning of the year. The stock has recently bounced back from its July lows and climbed above resistance at its 10-week and 20-week moving averages. These trendlines had served as resistance from April through late August.





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




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