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The Allstate Corp. Sees Heavy Call Volume Ahead of Ex-Dividend Date

Joseph Hargett (jhargett@sir-inc.com)

3/9/2010 2:54:41 PM

The Allstate Corp. (ALL) has attracted quite a bit of attention from options traders this afternoon. Specifically, more than 140,000 contracts have changed hands on ALL, outstripping the stock's daily average trading volume by more than 17 to one. Additionally, calls account for more than 99% of this volume, according to data from WhatsTrading.com.

Drilling down on the activity, it appears that most of this call volume has been sold. For instance, two blocks of 5,020 contracts traded on the in-the-money March 21 call for the bid price of $0.92 on the Chicago Board Options Exchange (CBOE) at about 12:23 p.m. Eastern, indicating that these contracts were likely sold to open.

Why would a trader sell so many in-the-money calls? The likely explanation is that tomorrow is Allstate's ex-dividend date, and this trader has entered a dividend capture play.

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Call Volume Amplifies on AT&T Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 1:41:09 PM

Option activity has been abuzz on AT&T Inc. (T) today, with the communications concern seeing three times its average daily volume. Calls have been especially popular on T today, with 26,000 of these bullish bets trading so far.

Drilling down on specific activity, it appears the back-month series has had particular appeal for option players. The April 26 call has seen traffic of 8,002 calls cross the tape today, with over half trading at the ask price, suggesting they were bought. However, with open interest at this strike currently checking in 22,174 contracts, we cannot yet determine whether today's activity will translate into new positions.

The April 25 call has also seen high volume today, with 3,237 contracts changing hands. With 74% of these calls trading at the bid price, it appears a portion of these calls were sold. There are 18,659 contracts presently in place at this strike, so we'll have to wait until tomorrow to verify whether these calls were sold to open, or sold to close.

The International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) report a 10-day call/put volume ratio of 7.08, which ranks in the 100th annual percentile. In other words, speculators are showing greater preference for calls now than any other time during the past year.

Elsewhere on the Street, analysts are split toward T. According to Zacks, 17 out of 33 analysts rate the equity a "buy" or better, with the remaining 16 analysts deeming T a "hold."

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GT Solar International (SOLR) Garners Bearish Attention in the Options Pits

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 12:03:33 PM

GT Solar International, Inc. (SOLR) succumbed to selling pressure on Monday, thanks to sector woes induced by fellow solar concern Yingli Green Energy (YGE). In light of the equity's retreat, put players pounced on SOLR, with single-session volume skyrocketing to almost 10 times the norm. More specifically, SOLR saw close to 1,000 puts cross the tape yesterday, compared to its average daily volume of roughly 100 contracts.

The deep-in-the-money March 12.50 put saw 600 contracts change hands � most of which traded at the ask price, implying they were likely bought. Plus, put open interest at the front-month strike increased by exactly 600 contracts overnight, confirming our suspicions of fresh pessimistic positions. What's more, the March 12.50 strike remains most popular today, with almost 1,200 contracts exchanged so far.

The recent affinity for SOLR puts is further echoed by the latest data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past two weeks, the stock has racked up a put/call volume ratio of 0.50, in the 85th annual percentile. In other words, traders on the ISE and CBOE have initiated bearish bets at a faster pace only 15% of the time during the past year.

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Call Players Predict Extended Rebound for Sohu.com Inc. (SOHU)

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 11:28:40 AM

Near-term call buyers swarmed Sohu.com Inc. (SOHU) on Monday, with single-session volume more than quadrupling the norm. More specifically, the Chinese Internet issue saw roughly 5,100 calls change hands, compared to its expected daily volume of fewer than 1,200 contracts.

Nearly all of the action centered on the stock's near-the-money March 55 strike, which saw almost 4,500 contracts cross the tape. The majority of the calls traded at the ask price, and call open interest at the front-month strike more than tripled overnight, hinting at buy-to-open activity. In fact, the 55 strike is now home to peak call open interest in the March series, with more than 5,800 contracts in residence.

By purchasing the March 55 calls, the buyers are betting the shares of SOHU will muscle past the $55 level by options expiration on Friday, March 19. At last check, the equity has added 1.7% to explore the $54.40 vicinity.

From a longer-term perspective, since grazing the $48 region in mid-February, the shares of SOHU have powered more than seven points higher, outpacing the broader S&P 500 Index (SPX) by 2% during the past 20 sessions. What's more, the stock is now poised to close the week atop its 20-week moving average for the first time since October 2009.

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Disappointing Earnings Stimulate Option Activity on H&R Block, Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 11:27:01 AM

Tax titan H&R Block, Inc. (HRB) filed its own return Monday, reporting its third-quarter earnings. Specifically, HRB reported per-share profits of 16 cents, a 20% decrease from the same year-ago period. Additionally, HRB refused to provide a full-year outlook, instead tersely warning that 2010 looked grim given the high unemployment levels.

Following Monday's report, option players flocked to the equity, driving volume to double HRB's daily average. Specifically, call volume soared to 5,454 contracts traded -- four times the equity's average daily call volume of 1,200.

The March 17 call received the most attention, with 3,931 contracts changing hands. Overnight, open interest at this strike grew by 2,881 contracts, pointing to the accumulation of fresh positions. What's more, 44% of these calls crossed the tape at the ask price, suggesting a portion of these calls were bought to open.

The International Securities Exchange (ISE) reports that over four calls have been bought to open for every one put during the past 10 trading sessions. This ratio ranks in the 78th annual percentile of readings taken in the past year.

Elsewhere on the street, short interest on HRB has spiked over 18% during the past month, and now accounts for 3.77% of the equity's total available float. Some of the recent call activity could be credited to bears hedging their short positions with calls.

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Commentary by WhatsTrading.com

Citigroup Inc (C) $3.81 +7.02%

3/9/2010 1:20:01 PM

Citi (C) calls are seeing heavy trading as shares gain 22 cents to $3.78, session highs and their best levels of 2010. 165.6K April 4 calls traded (37% Mid / 52% Ask), 138.5K Mar 4 calls (78% Ask), and 54.8K Jun 4 calls traded (27% Mid / 55% Ask). An impressive 581K Citi calls traded so far and trading is still brisk. Implied volatility is down about 2.5 percent to 49. The bullish flow comes amid mixed action in the financials Monday, but seems to reflect some optimism that the worst might be over for Citi shareholders.

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AirTran Holdings Inc (AAI) $5.22 +5.24%

3/9/2010 12:20:00 PM

Airtran (AAI) is up 29 cents to $5.25 amid relative strength in the airline sector Tuesday. Reuters reports that demand for air travel among business customers is picking up. According to UAL CFO Kathryn Mikells, "We're clearing seeing signs of economic recovery and premium and corporate travelers returning." The Arca Airline Index (.XAL) is up 2.4 percent with help from the 5.8 percent gain in AAI. Meanwhile, AAI call options are seeing action, with 2130 traded, or about 7X the normal for the first two hours of trading. Mar, April, and Oct $5 calls are seeing the bulk of the flow.

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Cisco Systems Inc (CSCO) $26.20 +0.27%

3/9/2010 11:00:03 AM

Cisco Systems (CSCO) calls are seeing active trading ahead of the company's 8:00 a.m. PT web cast. The networking company is expected to make a major product announcement, which might be new technology for wireless carriers. Shares are up 3 cents to $26.16 and 64K calls traded (28K puts). The total volume represents 7X the typical activity for the first hour of trading. March 26, March 27, and April 27 calls are the most actives. Implied volatility is up about 3.5 percent to 26, as players jockey for position ahead of the news.

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Daily Rundown, March 9

3/9/2010 10:20:03 AM

Stocks are indicated lower on weakness overseas and falling commodities prices Tuesday. Less than thirty minutes before the opening bell, stock index futures indicate that the Dow Jones Industrial Average might lose about 20 points at the open.\n
\nTrading was cautious overseas before the opening bell on Wall Street. While Asias equity markets finished mixed, benchmarks are broadly lower across Europe. UKs FTSE is down .7 percent, Frances CAC 40 lost .6 percent, and Germanys DAX slipped .6 percent.\n
\nWeakness in Europe comes as Greeces Prime Minister George Papandreou travels to Washington to meet with President Obama Tuesday. In a speech to the Brookings Institute Monday, Papandreou said his country has not requested a bailout, but hopes European support will ensure his debt ridden country can borrow from global financial markets.\n
\nMeanwhile, the euro is taking a hit, falling .0085 to 1.3546 against the buck. The dollar fell .52 to 89.76 against the Japanese yen.\n
\nWith no economic data to guide the market action, bonds are bid on the spreading problems in Europe and after China reiterated its commitment to buying Treasurys. The benchmark ten-year note is up 8/32nd and now yields 3.68 percent.\n
\nHowever, euro weakness is weighing on commodities. Crude oil lost $1.37 to $80.50 a barrel and gold fell $11.50 to $1112.50 an ounce.\n
\nAmong the stocks to watch Tuesday, Cisco (CSCO) moves into the spotlight at 11:00 eastern time. The networking company is expected to announce a new product that will forever change the internet, which is possibly a technology for wireless carriers.\n
\nTexas Instruments (TXN) is down 1.4 percent after the company offered in-line guidance in its mid-quarter update after the closing bell yesterday. TIVO slipped 1.5 percent, even after the company posted earnings and revenues that easily topped analyst estimates late Monday. H&R Block (HRB) is also lower on earnings. Navistar (NAV) and Collective Brands (PSS) might see some pre-earnings action ahead of earnings, due out after the closing bell. \n

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Unusual Activity Roundup, Mar 8

3/8/2010 4:19:35 PM

Some less actively traded names seeing bullish order flow: Iridum Comm (IRDM), General Growth Properties (GGP), Logitech (LOGI) Bearish order flow: Pinnacle Entertainment (PNK), Rehabcare Group (RHB), Wonder Auto (WATG) Post Earnings: Poniard Pharmaceuticals (PARD), Yingli Energy (YGE) Pre-Earnings: Kroger (KR), E-House Financial (EJ), H&R Block (HRB) Ex-div.: Home Depot (HD), CBS, Brinker (EAT), Allegheny Tech (ATI), Expedia (EXPE)

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Palm Inc (PALM) $5.74 +0.53%

3/8/2010 1:59:39 PM

PALM, which hit a new 52-week low of $5.4 this morning, has seen a 17 cent spike in the past few minutes and is now up a nickel to $5.76. Option volume is still on the light side, with 18K calls and 12K puts traded. Implied volatility in PALM has been moving higher for the past few weeks and is up another 2.5 percent to multi-week highs around 93.

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Research In Motion Ltd (RIMM) $72.90 +4.89%

3/8/2010 12:19:39 PM

Resarch in Motion (RIMM) is up $3.28 to $72.78, the best gainer in the NASDAQ 100, and heading to session highs in active trading. Shares opened higher after BMO raised the stock to Outperform from Market perform and upped the price target to $80 from $75. The stock has been able to build on the early momentum and, in the options, 57000 calls now traded, or about 4X the typical activity for the first 90 minutes of trading. March 70 and 75 calls are the most actives, with 19.4K and 17.4K traded, respectively. Implied volatility is moving as well, up about 8 percent to 37.

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Visa Inc (V) $90.48 +2.23%

3/8/2010 11:19:39 AM

Visa (V) touched a new 52-week high and was recently up $1.74 to $90.25 amid strength in the credit card names (MA is up $6.76 to $246.30). In the options, Visa is active. 11,000 calls and 5640 puts traded so far. The top trades have been lots of March 85 puts at the ask. March 90 calls are the most actives. There is no news on V or MA today, but implied volatility is up 1.5 percent to 23.75, as it appears that premium buyers are taking positions in anticipation of increasing volatility in Visa over the next two weeks.

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Cell Therapeutics Inc (CTIC) $1.12 +25.09%

3/8/2010 9:59:41 AM

Cell Therapeutics (CTIC) is up 22 cents to $1.12 per share and calls are active in early trading after the FDA completed a review of a new overseas plant that manufactures pixantrone and found the site in compliance. Shares are up and early action includes a sweep of 4000 Sep 5 calls at a nickel. Looks like an opening lottery ticket buyer.

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Unusual Activity Roundup, Mar 5

3/5/2010 3:59:55 PM

Some less actively traded names seeing bullish order flow: Onyx Pharmaceuticals (ONXX), Illimuna (ILMN), Convergys (CVG) Bearish order flow: Meridian Holdings (MHLD), Prepaid Legal Services (PPD), Grand Canyon Education (CGNX) Post Earnings: Marvell Tech (MRVL) Pre-Earnings: Poniard Pharmaceuticals (PARD) Ex-div.: Public Service Enterprise (PEG), Traveler's (TRV), Reynolds American (RAI), Ameren (AEE), PPL, Baxter (BAX), News Corp (NWSA).

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More Options Commentaries and Observations by Schaeffer�s

Put Volume Accelerates on Chesapeake Energy Corporation

Put activity is abnormally heavy today on Chesapeake Energy Corporation (CHK), with roughly 14,000 contracts crossing the tape so far. Today's surge in put trading represents approximately two times the stock's expected put volume of about 6,500 contracts.

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Option Activity Alert: Morgan Stanley Could Be Stifled by Stiff Resistance

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Options Strategy of the Day: The Long Call Butterfly

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Option Activity Alert: Has Medivation, Inc. Found a Floor?

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