Options Activity for Apollo Group (APOL), Apple Inc. (AAPL) and Petroleo Brasileiro (PBR)
Friday, September 24, 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 Apollo Group (APOL), while call trading jumped on Apple Inc. (AAPL) and Petroleo Brasileiro (PBR). 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.

Apollo Group (APOL)

Apollo Group Inc. (APOL) was in the spotlight Thursday, after the U.S. Education Department indicated it might postpone implementation of tough new regulations for for-profit schools.

"We are keeping our options open," Education Secretary Arne Duncan said. The remark boosted share prices for the schools, which have been volatile on fears that the Education Department may declare some programs ineligible for financial aid.

Critics say the schools produce poorly prepared students with big debts, often financed with federal aid. The proposed rules would require for-profit schools to prove that their former students are either paying off loans or are capable of doing so.

More than 38,600 contracts crossed the tape on APOL on Thursday. This jump in volume was more than five times the stock's average daily trading volume of 7,736 contracts, according to data from WhatsTrading.com. What's more, roughly 66% of the volume changed hands on the put side.



Meanwhile, the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have reported 2.02 APOL puts purchased to open for every one call purchased to open during the past 50 trading sessions. This ratio of puts to calls is higher than 95% of all those taken during the past year.

What's more, the put/call open interest ratio (SOIR) for APOL comes in at 2.43, as put open interest more than doubles call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 99% of all those taken during the past year. In other words, short-term options players have been more pessimistically aligned toward the shares only 1% of the time during the past 12 months.

Short sellers have also increased their bearish bets toward the shares. During the past month, the number of APOL shares sold short increased by 20% to 11.6 million. This accumulation of bearish bets accounts for more than 9% of the company's total float. A continuation of this trend toward short selling could pressure the shares lower.

Technically speaking, the shares of APOL are down more than 16% since the beginning of the year. However, the equity has recently bounced off support in the 40 region, climbing along its 10-day moving average to conquer round-number resistance at the 50 level. The stock has also moved above staunch resistance at its 10-week and 20-week moving averages.



Apple Inc. (AAPL)

Apple Inc.'s (AAPL) iPhone topped JD Power's smartphone satisfaction study for a fourth straight year, followed by Motorola and HTC. The survey was released Thursday. The scores for all three companies exceeded the industry average. "Sadly, the same cannot be said for the scores of RIM, Samsung, Palm, and Nokia," Digital Daily blogger John Paczkowski commented, noting the latter four scored below average in customer satisfaction.

Options trading was brisk on AAPL on Thursday, as more than 629,100 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 251,705 contracts, according to data from WhatsTrading.com. In addition, traders were feeling somewhat optimistic, as 65% of the volume changed hands on the call side.



Optimism is on the rise toward the security. The ISE reports that nearly two calls have been bought to open for every one put bought to open during the past two trading weeks. This ratio of calls to puts is higher than 79% of all those taken during the past year.

What's more, the SOIR for AAPL comes in at 0.77, which is lower than 78% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 22% of the time during the past 12 months.

Meanwhile, Wall Street is overwhelmingly optimistic toward the shares of AAPL. According to Zacks, the stock has earned 52 "strong buy" ratings, six "buys," and two "holds."

From a technical perspective, the stock has earned this optimism, as the shares are up more than 37% since the beginning of the year. The stock has steadily rallied along the support of its ascending 10-week and 20-week moving averages since March 2009, and is now hovering near an all-time high.



Petroleo Brasileiro (PBR)

Brazilian state oil company Petroleo Brasileiro SA (PBR) raised $70 billion on Thursday -- the world's biggest share offering ever -- giving the company the financial muscle it needs to tap vast offshore oil reserves. The cash will help fund the world's largest oil exploration plan, estimated at $224 billion for the 2010-2014 period, which aims to turn Brazil into a major energy exporter. The firm sold 1.87 billion new preferred shares at 26.30 reais each, the company said in a regulatory filing. It sold 2.4 billion new common -- or voting -- shares at 29.65 reais each.

Options players flocked to PBR on Thursday, as more than 195,700 contracts changed hands. This surge in volume was more than four times the stock's average daily trading volume of 44,272 contracts, according to data from WhatsTrading.com. In addition, approximately 53% of the volume changed hands on the call side.



Options players have grown more skeptical of the shares Sentiment is somewhat mixed toward the shares at the moment. The ISE has reported an increase in put trading. During the past two trading weeks, 1.7 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 93% of all those taken during the past year.

On the other hand, the SOIR for PBR comes in at 0.78, which is lower than 82% 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 18% of the time during the past 52 weeks.

Meanwhile, Wall Street remains smitten. According to Zacks, the stock has earned six "buy" ratings and four "holds." This configuration leaves some room for downgrades should the stock not perform as expected.

Technically speaking, the shares of PBR are down more than 25% since the beginning of the year. The equity has been steadily grinding lower under its 10-week and 20-week moving averages since it reached a peak in December 2009. br>





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