Option Activity for Monday, August 09, 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.

A review of the options movements that have occurred due to a notable analyst note with a new bullish rating for ZymoGenetics, Inc. (ZGEN), a post-earnings upgrade for Whole Foods Market, Inc. (WFMI), and a mixed bag of new brokerage initiations for new kid on the Street Tesla Motors Inc. (TSLA).

ZymoGenetics, Inc. (ZGEN)

ZymoGenetics, Inc. (ZGEN) was initiated with a new "buy" rating at Canaccord Genuity. The stock has already earned a decent number of bullish analyst ratings, according to data from Zacks, with four out of eight brokerage firms maintaining a "strong buy" opinion on ZGEN.

ZGEN has rallied nearly 6% in response to this morning's bullish note, with the stock inching above resistance at its 10-week moving average. This trendline hasn't been surmounted on a weekly closing basis since April 23.

Following today's upbeat analyst initiation, put volume has surged well beyond the expected level for ZGEN, with 2,000 contracts crossing the tape. All of these puts have traded at the equity's November 5 put, which is narrowly in the money. With volume easily outpacing open interest, it's a safe bet that new puts are being opened at this back-month strike today.

Whole Foods Market, Inc. (WFMI)

Whole Foods Market, Inc. (WFMI) was upped from "hold" to "buy" at Canaccord Genuity. Shares of the upscale grocer took a dive in the wake of last week's earnings report, and as a result, the brokerage firm believes that "an opportunity has presented itself to buy ahead of the unit growth re-acceleration and consistent earnings growth."

WFMI is up more than 1% on the heels of this upgrade, adding to its year-to-date gain of roughly 33%. The stock is rebounding from support at its 32-week moving average, which has provided a key technical floor since early July.

Traders seem unimpressed by WFMI's uptrend in 2010, judging by a predominance of pessimism in the stock's sentiment backdrop. Short interest rose by 13.7% during the past month and now accounts for 11.7% of the equity's float, or 6.60 times WFMI's average daily trading volume -- pointing to a healthy supply of sideline cash to support future gains.

Likewise, WFMI's put/call open interest ratio (SOIR) of 1.44 rests in the 82nd annual percentile, suggesting that short-term options players have been more bearishly aligned just 18% of the time during the past year. If these skeptics are spooked by the equity's freshly resumed uptrend, a capitulation by the weaker bearish hands could translate to more upside for WFMI during the short term.

Tesla Motors Inc. (TSLA)

Wall Street newcomer Tesla Motors Inc. (TSLA) attracted two new analyst ratings this morning. JPMorgan initiated coverage with an "overweight" rating and a $25 price target, while Morgan Stanley deemed the stock worthy of a lukewarm "equal weight" recommendation.

TSLA has inched fractionally higher on the heels of this mixed commentary, but the stock could have trouble regaining a perch above the round-number $20 region. This formerly supportive level was breached decisively last Friday, and could now switch roles to act as resistance. Complicating matters are TSLA's 10-day and 20-day moving averages, which are currently converging near $20.50.

Option volume today is slightly skewed toward the bullish end of the spectrum, with traders appearing to buy new calls at the equity's January 2012 15-strike call. However, this call volume should be taken with a proverbial grain of salt -- short interest accounts for a hefty 12% of TSLA's float, so there's no shortage of bears that might be looking to hedge their bets.

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