Options Activity for Cree (CREE), Visa Inc. (V) and XL Group (XL).
Friday, September 10, 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 looks at the growing preference for puts on Cree (CREE), as well as accelerated call activity on Visa Inc. (V) and XL Group (XL).

Cree Inc. (CREE)

Options players flocked to Cree Inc. (CREE) on Thursday, as more than 69,100 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 25,169 contracts, according to data from WhatsTrading.com. In addition, traders were feeling skeptical, as 62% of the volume changed hands on the put side.



Meanwhile, the International Securities Exchange (ISE) reports that call trading has been on the rise toward the shares. During the past 10 trading sessions, 2.5 calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 82% of all those taken during the past 12 months, pointing to a rising optimism.

Elsewhere, we find that the put/call open interest ratio (SOIR) for CREE comes in at 1.00, which is in the middle of its annual range, making it difficult to get a clear sentiment reading on short-term options players.

However, short sellers are loading up on bearish bets. During the past month, the number of CREE shares sold short increased by 19% to 11.5 million. This accumulation of pessimistic positions accounts for nearly 11% of the company's total float. A continuation of this trend could increase selling pressure on the shares.

Finally, Wall Street is smitten with the shares. According to Zacks, the stock has earned 16 "buy" ratings, eight "holds," and two "sells." This configuration leaves ample room for potential downgrades in the event of continued weakness.

From a technical perspective, the shares of CREE have retreated more than 12% since the start of 2010. The equity enjoyed an impressive rally along its 10-week and 20-week moving averages from January 2009 through April 2010. Since its peak, the stock has stumbled lower, falling below its intermediate-term trendlines and support in the 60 region.



Visa Inc. (V)

Visa Inc. (V) was the center of some brisk options trading on Thursday, as more than 66,000 contracts crossed the tape. This jump in volume was more than triple the stock's average daily trading volume of 20,484 contracts, according to data from WhatsTrading.com. Furthermore, approximately 57% of the volume changed hands on the call side.



On the other hand, the ISE has seen a jump in put trading recently. The 10-day put/call volume ratio comes in at 0.73, which is higher than 80% of all those taken during the past year.

Furthermore, the SOIR for V comes in at 0.84, which is higher than 74% 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 26% of the time during the past 52 weeks.

The only group that looks on the shares of V in a positive light are analysts. According to Zacks, the stock has been awarded 28 "buy" ratings and three "holds." Any downgrades from this optimistic group could spell trouble for the security.

Technically speaking, the shares of V are down more than 23% since the beginning of the year. The equity staged a stellar rally from its January 2009 low to its late April 2010 peak, before rolling over and falling below former support at its descending 10-week and 20-week moving averages.



XL Group (XL)

Options traders focused on XL Group plc (XL) on Thursday, as more than 40,400 contracts changed hands. This surge in volume was more than 11 times the stock's average daily trading volume of 3,630 contracts, according to data from WhatsTrading.com. What's more, roughly 90% of the volume crossed the tape on the call side.



Calls have been growing in popularity recently. The ISE reports that 14 XL 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 92% of all those taken during the past 12 months, pointing to a growing optimism.

Meanwhile, short sellers have started to unload their bearish bets. During the past month, the number of XL shares sold short decreased by 12% to 14 million. This accumulation of bearish bets still accounts for 4% of the company's total float. An unwinding of these pessimistic positions could help to add some lift to the shares.

Wall Street also has a bullish outlook toward the shares. According to Zacks, the stock has earned 11 "buy" ratings and six "holds."

From a technical perspective, the shares of XL are up more than 10% since the beginning of the year. The security recently popped above resistance at its 10-week and 20-week moving averages, and is now struggling with round-number resistance at the 20 level.





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




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