Options Activity for Netflix, Inc. (NFLX) and Alcoa Inc. (AA)
Tuesday, September 07, 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.

Netflix, Inc. (NFLX)

It's kind of an understatement to call Netflix, Inc. (NFLX) an "outperformer," as the online video king has added a whopping 151% year-to-date. The stock's ascent has been underlined by strong support from its ascending 10-week and 20-week trendlines, which have led NFLX to new highs since February. NFLX continued its record-breaking trend today, touching a new 52-week high of $142.90.

Call players have responded enthusiastically to NFLX's feat, with roughly 24,000 calls changing hands so far today -- well above the stock's expected single-session call volume of around 19,000 contracts.

The September 145 call has been most popular today, with over 3,800 contracts changing hands on this out-of-the-money strike. Furthermore, most of these calls changed hands closer to the ask price, indicating they were likely purchased. If these calls were, in fact, bought to open, then it would seem that traders are expecting NFLX's ascent to continue.

Meanwhile, despite NFLX's outstanding technical performance, pessimism continues to linger. Specifically, short interest accounts for 23% of the stock's total available float, and Zacks reports that 23 of the 29 analysts following the stock rate it a "hold" or worse. As NFLX continues its uptrend, a reversal of this bearish sentiment could help fuel the shares even higher.

Alcoa Inc. (AA)

The Dow's recent rally was cut short today, as concerns over European banks' stress tests plagued the Street. Alcoa Inc. (AA) has been one of the Dow's decliners today, with the stock now testing tentative support at its 10-week moving average, located just below the $11 level.

As a result, put players have flocked to AA today, with some 19,000 of these bearish bets changing hands so far -- more than double the blue chip's expected single-session put volume of around 6,800 contracts.

AA's September 11 put has been front-and-center today, with 6,339 contracts changing hands -- 87% of which traded at the ask price, suggesting they were purchased. In fact, for the front-month series, the 11 strike houses peak put open interest of 10,363 contracts. With AA trading around $10.86, these 11-strike puts are now in the money.

Today's activity aside, option players are generally bullish on AA, with the stock's put/call open interest ratio (SOIR) of 0.46 revealing that call open interest more than doubles put open interest among options with less than three months until expiration. This ratio ranks in the 24th annual percentile, implying that short-term traders are more bullishly aligned toward AA than usual lately.

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