Option News
Thursday, May 6th, 2010

AvalonBay Communities, Inc. (AVB)

AvalonBay Communities, Inc. (AVB) attracted plenty of attention from the bears on Wednesday, with put volume jumping to three times the expected level. About 4,400 puts changed hands on AVB yesterday, compared to just 606 calls that were traded. In other words, roughly seven times more puts than calls crossed the tape during the course of the session.

AVB options chart

Also, AVB's 10-day International Securities Exchange (ISE) put/call volume ratio of 22.29 indicates that puts bought to open have easily outnumbered calls during the past two weeks.

AVB chart

Wednesday's most active strike was AVB's July 100 put, where 2,055 contracts were traded. About 87% of these puts changed hands at the ask price, indicating they were purchased, and open interest at this strike escalated overnight by 2,004 contracts.

Shares of AVB have climbed nearly 28% in 2010, easily besting the broader equities market, therefore it is difficult to understand why the negativity towards the stock. Maybe put players view AVB as overbought and expect a pullback.


CBS is a mass media company with operations in the following segments: Television, Radio, Outdoor and Publishing. CBS, in their quarterly earnings report said they had losses of 4 cents per share. Analysts were looking for profits of 5 cents per share for CBS' first quarter. Shareholders were not happy with this news, as CBS surrendered 3.4% on the heels of this disappointing report.

CBS has been trending slowly upward since February, reaching an annual acme of $16.98 earlier this week. However, since then, the stock has pulled back to its 10-week moving average, which is located right around the $15 level.

CBS options chart

What's more, with peak call open interest of 9,835 contracts at the May 17 strike, there is an additional layer of potential options-related resistance working against CBS in the near term.

Option players are pessimistic toward CBS due to several factors, which are:-

CBS chart

• Analysts are quite skeptical about CBS by two-thirds giving a “hold” or worse rating.

• Quarterly results have been and gone and improvement in the price of the shares is not evident.

• There is a great deal of negative sentiment towards CBS.

• The equity has not surpassed the $17 level since September, 2008.

Priceline.com Inc.'s (PCLN)

Discount online travel company priceline.com Inc. (PCLN) is scheduled to release its quarterly earnings report after the close of trading on Monday, May 10, with analysts looking for a profit of $1.66 cents per share. Comparatively, PCLN earned 86 cents per share in the same period last year. Historically, the firm has bested the consensus estimate in each of the prior four reporting periods, with an average upside surprise of 18.93%.

PCLN option volume

Sentiment is mixed heading into the company's quarterly report. On the options front, there is a fairly even split on call contracts and put contracts. However, data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) says there is a slight bias toward call options heading into PCLN's quarterly report.

PCLN buy-sell

Analysts are very bullish towards PCLN with a majority recommendation to “buy”. According to Zacks, PCLN has scored 10 "buys," four "holds," and no "sell" ratings. Thomson Reuters reports that the average 12-month price target for PCLN rests at $229 per share, a discount to the stock's close at $246.98 per share on Wednesday. While there is little room for upgrades, analysts can still lift their price targets on PCLN. Such bullish moves could provide additional buying strength for the security.

PCLN has rallied more than 135% during the past 52 weeks.

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