Options Activity for Brocade Communications Systems (BRCD), Corning (GLW) and Marvell Technology Group (MRVL)
Thursday, October 28, 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 Brocade Communications Systems (BRCD), Corning (GLW) and Marvell Technology Group (MRVL). 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.

Brocade Communications Systems (BRCD)

Options players were attracted to the shares of Brocade Communications Systems Inc. (BRCD) on Wednesday, as more than 102,400 contracts crossed the tape. This surge in volume was more than four times the stock's average daily trading volume of 25,268 contracts, according to data from WhatsTrading.com. In addition, traders were feeling somewhat optimistic, as 68% of the volume changed hands on the call side.





Calls have been dominant on the shares on BRCD. The International Securities Exchange (ISE) reports that 76 calls have been purchased to open for every one put purchased to open during the past 10 trading days. This ratio of calls to puts is higher than 88% of all those taken during the past year.

Furthermore, the put/call open interest ratio (SOIR) for BRCD comes in at 0.27, as call open interest nearly quadruples put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than 99% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 1% of the time during the past 12 months.

Short sellers are also unloading their bearish bets. During the past month, the number of BRCD shares sold short dropped by 7.3% to 23 million. However, this accumulation of pessimistic positions still accounts for roughly 5.5% of the company's total float.

Finally, we find that Wall Street hasn't jumped on the stock's bullish bandwagon. According to Zacks, the stock has earned seven "strong buys," four "buys," and 16 "holds."

Technically speaking, the shares of BRCD are down more than 18% since the beginning of the year. However, the equity recently bounced off support in the 5 region and climbed above resistance at its 10-week and 20-week moving averages. The shares are now resting on their 10-week trendline as they attempt to take out resistance in the 6-6.50 area.



Corning (GLW)

Corning Inc. (GLW) was the center of some brisk options trading yesterday, as more than 81,100 contracts changed hands. This jump in volume was more than six times the stock's average daily trading volume of 12,201 contracts, according to data from WhatsTrading.com. Furthermore, pessimism was running high, as 87% of the volume crossed the tape on the put side.



Put trading has been on the rise on the ISE and Chicago Board Options Exchange (CBOE). The 50-day put/call volume ratio comes in at 0.98, which is higher than 94% of all those taken during the past year, pointing to rising pessimism.

What's more, the SOIR for GLW comes in at 0.57, which is higher than 68% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the security only one-third of the time during the past 12 months.

However, this is where the pessimism stops, as analysts are lined up in the bulls' camp. According to Zacks, the stock has earned 14 "buy" or better ratings and just three "holds."

From a technical perspective, the shares of GLW are down approximately 4% since the beginning of the year. The security has fallen into a sideways trading range between resistance at the 19 level and support at the 16 level since May. The stock is currently in the process of being once again rejected at the 19 level and could be headed for another test of the 16 level.



Marvell Technology Group (MRVL)

Options trading was brisk on Marvell Technology Group Ltd. (MRVL) on Wednesday, as more than 154,300 contracts changed hands. This surge in volume was 12 times the stock's average daily trading volume of 13,017 contracts, according to data from WhatsTrading.com. In addition, roughly 75% of the volume changed hands on the put side.



Put trading has been gaining ground on MRVL recently. The ISE 10-day put/call volume ratio comes in at 0.67, which is higher than 69% of all those taken during the past year, indicating that put trading is growing at a faster clip than call trading on the ISE.

Meanwhile, the SOIR for MRVL comes in at 0.88, which is higher than 75% 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 one-quarter of the time during the past 12 months.

Short sellers, on the other hand, have started to unwind their pessimistic positions. During the past month, the number of MRVL shares sold short dropped by 36% to 15.2 million. This accumulation of bearish bets accounts for only 2.8% of the company's float, providing little sideline money for a boost higher.

Wall Street is optimistic toward the shares. Zacks reports that the stock has earned 15 "strong buy" ratings, five "buys," and six "holds."

Technically speaking, the shares of MRVL are down nearly 10% since the start of 2010. However, the stock has been in an uptrend since finding support at the 14 level in mid-August. The equity recently bounced off support at its 10-week moving average and spiked through short-term resistance at the 18 level.





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