Options Activity for Friday, June 25, 2010


QUALCOMM, Inc. (QCOM) has become a favorite target of call buyers lately. During the past five days, the International Securities Exchange (ISE) reports that traders have bought to open 14,684 calls on the equity, compared to 920 puts. The security's five-day call/put volume ratio of 15.96 reveals that nearly 16 times more bullish bets than bearish were purchased during this time frame.

QCOM option-june25-2010

Taking a slightly longer-term look, QCOM's 10-day ISE call/put volume ratio smoothes out to a tamer 2.23, with calls bought to open more than doubling puts during the past two weeks. This ratio ranks in the 73rd annual percentile, suggesting that traders have snapped up calls over puts at a faster pace just 27% of the time during the past year.

In fact, the most popular front-month strike is QCOM's July 35 put, with 60,547 contracts outstanding. By contrast, peak call open interest for the July series consists of just 26,582 contracts at the 38 strike.

With QCOM trading near $34, put traders are favoring at-the-money options, while call players prefer out-of-the-money strikes. However, it's possible that the recent uptick in call buying isn't necessarily indicative of bullish sentiment toward QCOM.

Short interest currently accounts for just 1.4% of the equity's float, as many bears have taken profits off the table in the wake of a steep decline in QCOM shares. However, with out-of-the-money calls gaining popularity on this slumping security, it's possible that this option volume is linked with a renewed bout of short-selling activity by the bears. That's because out-of-the-money calls are a relatively inexpensive way for shorts to limit their upside risk.

From a technical perspective, QCOM has been suffering in 2010. The stock has lost nearly 25% of its value year-to-date, easily underperforming the broader S&P 500 Index (SPX). In fact, QCOM has lagged the SPX by 10 percentage points during the past 60 sessions, on a relative-strength basis.

As a result of its swoon, QCOM has racked up a string of new annual lows. In fact, the shares are poised to notch a monthly close below key support at $35 for the first time since March 2009.


The security is also trading well below resistance from its benchmark 200-day moving average, which rejected QCOM's late-March rally attempt. Plus, the stock's 10-month and 20-month moving averages are now on the verge of completing a bearish cross, confirming QCOM's negative momentum on the charts.

As the stock continues to struggle, a renewed interest by short sellers could apply fresh selling pressure to the shares. Even more troubling, a continued accumulation of call options at out-of-the-money strikes could translate to options-related resistance during the near term, providing yet another technical headwind for beaten-down QCOM shares.


The Coca-Cola Company (KO)

Kicking things off with KO, put volume has climbed to three times the expected level so far, with roughly 16,000 contracts crossing the tape. Most active is KO's July 50 put, where 4,258 contracts have traded -- most at the bid price, suggesting they were sold.

At last check, KO was down 1.5% to trade near $51, extending a recent decline beneath resistance at its 10-week and 20-week moving averages.


Ford Motor Company (F)

Calls and puts are both popular on F today, with roughly 66,000 calls and 40,000 puts changing hands on the automaker by midday. The July 10 put is most active, with 15,125 contracts crossing the tape -- 88% at the ask price, revealing a bias toward buying activity. Ford shares are currently 2.4% lower to linger near $10.50, with the stock testing support at its 200-day moving average.


Noble Corporation (NE)

Call volume has exploded on NE, with about 34,000 of these bullishly oriented options trading so far. This represents roughly 11 times NE's expected daily call volume. The July 30 call is the center of attention, with more than 26,000 contracts trading.

About 64% of these calls have traded at the ask price, and implied volatility is up 7.4% at last check, suggesting that buyers are driving the bulk of today's volume.

NE's July 30 call currently carries open interest of just 4,333 contracts, so it's a safe bet that new calls are being opened here today. The stock is up 2.7% this afternoon to trade just shy of $30, with NE struggling to reclaim a foothold above its 20-day moving average.


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

Take control of your future prosperity the Easy way. Become a member of Stock Options Made Easy today!

Back to Stock Options Made Easy from Options Activity- June 25, 2010

Search Stock Options
Made Easy

Enjoy Relaxed or Fast-Paced Trading? Choose your Membership Style...

Whether you prefer to take a laid-back approach to your trading,

or to charge ahead in your options trading,

 Stock Options Made Easy Armchair Trader and Cut-to-the-Chase Trader Memberships put everything you need to succeed at your fingertips for just  $39 or $79 per month.

Search Stock Options
Made Easy


Subscribe to our FREE
newsletter for all the latest options news!

Enter Your Email Address

Enter Your First Name

Follow S_O_M_E on Twitter

Subscribe to our FREE
newsletter for all the latest options news!

Enter Your Email Address

Enter Your First Name

Follow S_O_M_E on Twitter