Options Activity for Google (GOOG), Johnson & Johnson (JNJ), and Nokia (NOK)
Monday, September 20, 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 look at a rise in call trading on Google (GOOG) and Johnson & Johnson (JNJ), and a rise in put trading on Nokia (NOK). 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.
Options trading was brisk on Google (GOOG) on Friday, as more than 120,000 contracts crossed the tape. This surge in volume was more than double the stock's average daily trading volume of 46,143 contracts, according to data from WhatsTrading.com. In addition, speculators were feeling upbeat, as roughly 72% of the volume changed hands on the call side.
The International Securities Exchange (ISE) has seen an increase in call trading recently. During the past 10 trading sessions, 1.5 GOOG calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 75% of all those taken during the past 12 months, pointing to a rising optimism.
The put/call open interest ratio (SOIR) for GOOG comes in at 0.65, as call open interest outnumbers put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than 55% of all those taken during the past year, pointing to a slightly bullish outlook.
Wall Street is smitten with the shares. According to Zacks, the stock has earned 27 "strong buy" ratings, four "buys," three "holds," and just one "strong sell." This extremely bullish configuration leaves ample room for potential downgrades.
Technically speaking, the shares of GOOG are down more than 20% since the beginning of the year. The equity has been in retreat mode since it reached a peak at 630 in January. However, since May, the security has shuffled sideways under resistance at the 500-510 region.
Johnson & Johnson (JNJ)
On Friday, Johnson & Johnson (JNJ) announced that it is in talks to pay 1.75 billion euros ($2.3 billion) to buy Dutch biotech firm Crucell, as it looks to launch itself into the global vaccine market. JNJ, which already owns 17.9% of Crucell, said its potential cash offer valued Crucell at 24.75 euros per share, a 58% premium to Thursday's closing price.
Options traders responded by sending more than 39,700 contracts across the tape for JNJ. This jump in volume was more than double the stock's average daily trading volume of 18,950 contracts, according to data from WhatsTrading.com. What's more, 82% of the volume changed hands on the call side.
Options sentiment is somewhat mixed toward the security at the moment. The SOIR for JNJ comes in at 0.98, which is lower than more than half of the readings taken during the past year -- pointing to a lingering optimism among options players.
However, the ISE has reported an increase in put trading. During the past two trading weeks, 1.6 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 80% of all those taken during the past year.
Likewise, short sellers are starting to add to their pessimistic positions. During the past month, the number of JNJ shares sold short increased by nearly 14% to 29.5 million. A continuation of this trend could increase the selling pressure on the shares.
Finally, Wall Street is thoroughly smitten with JNJ. According to Zacks, the stock has earned 14 "buy" ratings and seven "holds." However, there is still ample room for potential upgrades.
From a technical perspective, the shares of JNJ are down only 4% since the start of 2010. The equity appears to have put in a short-term bottom in the 57 region and bounced higher. The stock is now contending with former resistance in the 62 area.
Furthermore, the equity has climbed above former resistance at its 10-week and 20-week moving averages. This technical strength could squeeze the bears into jumping on the stock's bandwagon.
Nokia (NOK) was the center of some brisk options trading on Friday, as more than 64,900 contracts crossed the tape. This surge in volume was more than three times the stock's average daily trading volume of 16,608 contracts, according to data from WhatsTrading.com. Furthermore, roughly 56% of the volume changed hands on the put side.
Options players have grown more skeptical of the shares recently. The ISE has reported 1.7 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 85% of all those taken during the past 12 months.
There is still room for pessimism to grow, however. The SOIR for NOK comes in at 0.59, which is lower than more than half of the readings taken during the past 12 months.
What's more, Wall Street is skeptical of the shares. According to Zacks, the stock has earned seven "buy" ratings, 18 "holds," and five "sells." Any upgrades from this group could help to boost the shares.
Technically speaking, the shares of NOK are down more than 22% since the beginning of the year. Following a rejection by staunch resistance at the 16 level in April, the equity suffered a sharp decline under its 10-week and 20-week moving averages.
However, NOK has recently bounced off support at the 8 level and climbed back above these trendlines as the security attempts to bounce back.
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