Options Activity for Amazon.com (AMZN), Archer Daniels Midland (ADM) and Baxter International (BAX)
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 surge in options activity on Amazon.com (AMZN) following positive broker comments, while call trading jumped on Archer Daniels Midland (ADM) and Baxter International (BAX). 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.

Amazon.com (AMZN)

Amazon.com Inc. (AMZN) put in a strong session on Friday, thanks to upbeat analyst attention. More specifically, JPMorgan raised its 2010 and 2011 revenue and earnings estimates for the firm, and introduced an end-of-2011 price target of $198 -- up from the brokerage's end-of-2010 price target of $154. AMZN is gaining share within the expanding e-commerce market, the brokerage firm said, adding that margins should benefit as it sells more digital media products. JPMorgan also said it expects AMZN's international margins to catch up to U.S. levels.

Options players traded more than 151,800 contracts on Friday, nearly three times the stock's average daily trading volume of 52,763 contracts, according to WhatsTrading.com. Meanwhile, roughly 51% of the volume changed hands on the put side.



Put trading has been on the rise for the giant online retailer. The International Securities Exchange (ISE) has reported 1.11 puts purchased to open for every one call purchased to open during the past 10 trading sessions. This ratio of puts to calls is higher than 67% of all those taken during the past 12 months.

In addition, the put/call open interest ratio (SOIR) comes in at 1.18, as put open interest outnumbers call open interest among options slated to expire in less than three months. This ratio of puts to calls is higher than 75% 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 25% of the time during the past 52 weeks.

On the other hand, Wall Street remains optimistic. According to Zacks, the stock has earned 19 "strong buys," two "buys," 12 "holds," and one "strong sell."

Technically speaking, the shares of AMZN have soared more than 19% since the beginning of the year. In fact, the equity has rallied from its June and July lows near 106, with help from its ascending 10-day and 20-day moving averages.



Archer Daniels Midland (ADM)

Archer Daniels Midland Co. (ADM) was the center of some brisk options trading on Friday, as roughly 53,800 contracts crossed the tape --more than five times the stock's average daily trading volume of 9,615 contracts, according to data from WhatsTrading.com. In addition, approximately 80% of the volume changed hands on the call side.



Optimism has been on the rise toward the shares of ADM recently. The ISE reports that 23.8 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 96.5% of all those taken during the past 12 months, pointing to accelerated call trading.

Meanwhile, the SOIR for ADM comes in at 0.29, as call open interest more than triples put open interest among options slated to expire in less than three months. This ratio of calls to puts is lower than 98% 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 2% of the time during the past year.

Analysts are also smitten with ADM. According to Zacks, the stock has earned nine "buy" ratings and just one "hold." Should the company fail to live up to Wall Street's heightened expectations, the equity could be vulnerable to downgrades.

From a technical perspective, the shares of ADM are up 3% since the start of 2010. The equity has recently rallied along the support of its 10-day and 20-day moving averages, climbing from its June lows near the 24.50 level. The equity also appears to be consolidating into support at its rising 10-week moving average.



Baxter International (BAX)

Baxter International Inc. (BAX) could benefit from the recall of rival Octapharma's Octagam 5% drug, according to a Dow Jones Newswires article. Octagam 5% -- an intravenous treatment for immune disorders -- has been linked to blood clots and embolisms. JPMorgan notes BAX has excess capacity to pick up business.

Options trading was brisk on the security on Friday, as more than 53,200 contracts changed hands. This surge in volume was more than eight times the stock's average daily trading volume of 6,253 contracts, according to data from WhatsTrading.com. Furthermore, roughly 73% of the volume crossed the tape on the call side.



What's more, the ISE reports that 4.3 calls have been purchased to open for every put during the past 10 trading sessions. This ratio of calls to puts is higher than 67% of all those taken during the past 52 weeks.

Meanwhile, the SOIR for BAX comes in at 0.48, as call open interest doubles put open interest among options slated to expire in less than three months. This ratio of calls to puts is lower than 80% 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 20% of the time during the past year.

Analysts are also betting on a rise in the shares of BAX. According to Zacks, the stock has earned 10 "buy" ratings, six "hold" ratings, and just one "sell." Any downgrades from this group could spell trouble for the shares.

From a technical perspective, the shares of BAX are down more than 18% since the beginning of the year, but are attempting to stage a slow comeback. Since the equity put in a bottom in the 40 region, it has slowly rallied higher. br>





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