Options Activity for Apple Inc. (AAPL), Baidu, Inc. (BIDU), and Kraft Foods Inc. (KFT)
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.

It's been a good month on the Street, with the broad market bucking trends and making strides in September -- which has historically been a weak month for the market. In addition to several upbeat government reports this month, quite a few big-name stocks have reported better-than-expected earnings, and many equities have soared to new highs. Today we'll look at a few stocks that hit new 52-week peaks on Tuesday: Apple Inc. (AAPL), Baidu, Inc. (BIDU), and Kraft Foods Inc. (KFT).

Apple Inc. (AAPL)

First up is Apple Inc. (AAPL), whose Tuesday high of $287.35 was not only a 52-week peak for the tech concern, but also an all-time acme. The stock had been marching steadily higher since March 2009, but hit resistance around $270 in May, and spent the next few months range-bound in the $240 to $270 neighborhood. However, AAPL staged a rally in September, swiftly trekking above resistance at $270 in the process.

It doesn't hurt that AAPL has been doing fundamentally well lately, with the company's newly released iPad being an instant hit among the tech crowd. In fact, on Monday an analyst report suggested that iPad sales could propel the company's quarterly results past current consensus estimates. However, option players seemed skeptical of AAPL on Tuesday, with the October 290 call and October 300 call each seeing volume of roughly 30,000 contracts change hands. The bulk of these contracts crossed the tape at the bid price, revealing they were likely sold, and open interest at each of these strikes increased substantially overnight. In other words, it seems that some option players are calling a top to AAPL's rally.

In fact, with peak call open interest of 36,755 calls at the October 300 strike, and another substantial accumulation of 28,834 contracts at the October 290 call, AAPL could soon run into options-related resistance. Furthermore, the shares' current Relative Strength Index (RSI) is perched at an "overbought" 78. This lofty reading indicates that the shares may be due for a pullback in the near future.

Baidu.com, Inc. (BIDU)

Meanwhile, Chinese search-engine issue Baidu.com, Inc. (BIDU) soared to an all-time high of $92.31 on Tuesday. However, this technical feat is nothing new to BIDU, which has been creating a series of higher highs and higher lows since March 2009. Throughout this time, BIDU has relied on solid support from its 20-week trendline.

Call players responded enthusiastically to BIDU's technical feat on Tuesday, with volume of 54,000 calls changing hands on the session. Meanwhile, just 25,000 puts crossed the tape.

BIDU's October 95 call was most popular, with almost 9,000 contracts traded on this strike -- the majority of which changed hands at the ask price, indicating they were likely purchased. Open interest increased by 1,674 contracts overnight, confirming that fresh bullish positions were added at this out-of-the-money strike -- which now holds the title of peak call open interest for the October series.

Option players are generally optimistic about BIDU, as indicated by the stock's put/call open interest ratio (SOIR) of 0.99, which ranks in the 33rd annual percentile. In other words, short-term traders are more bullishly aligned toward BIDU than usual; however, there's still room for optimism to grow.

Kraft Foods Inc. (KFT)

Last but not least, we have Kraft Foods Inc. (KFT), which tagged a fresh 52-week high of $31.66 on Tuesday. The Dow component has been forging a steady path higher for the past several weeks, after regaining the support of its 10-week and 20-week moving averages in early September. In fact, these trendlines recently completed a bullish cross, suggesting that KFT's recent uptrend could continue.

Option players are certainly counting on further gains from KFT, with the November 32 call being Tuesday's most popular strike. Some 5,000 contracts changed hands on this strike, and open interest increased by 4,800 contracts overnight. This strike is now the undisputed home of peak call open interest for the November series. Meanwhile, peak call open interest for the October series can be found at the 31 strike.

Tuesday's bullish activity is a deviation from the norm for KFT. The blue chip component currently sports a SOIR of 1.58, which ranks just one percentage point shy of an annual bearish peak. As KFT continues its trek higher, a mass migration toward the bullish end of the spectrum could add additional fuel to KFT's fire.

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