Today's column includes a look at a rise in put trading on eBay (EBAY), an unusual jump in call trading on Marvell Technology Group (MRVL), and apparent optimism toward Yahoo! Inc. (YHOO). Each day, 3 Stocks to Watch focuses on stocks seeing heavy options trading and gives you a unique insight into each stock's sentiment backdrop.
eBay (EBAY)
Options traders flocked to eBay Inc. (EBAY) on Monday, as more than 66,800 contracts crossed the tape. This surge in volume was more than four times the stock's average daily trading volume of 16,200 contracts, according to data from WhatsTrading.com. In addition, approximately 57% of the volume changed hands on the put side.
Put trading has been on the rise toward the shares. The International Securities Exchange reports that its 10-day put/call volume ratio comes in at 0.83, which is higher than 78% of all those taken during the past year, pointing to a rising pessimism.
However, sentiment is far from a pessimistic extreme. The Schaeffer's put/call open interest ratio (SOIR) for EBAY comes in at 0.46, as call open interest more than doubles put open interest among options slated to expire in less than three months. This ratio of puts to calls is lower than 97% of all those taken during the past year. In other words, short-term options players have been more optimistically aligned toward the shares only 3% of the time during the past year. Should options players continue to build their bearish bets it could create fresh selling pressure for the security.
Meanwhile, Wall Street is still showing signs of optimism toward the shares. According toZacks, the stock has earned 17 "buy" ratings, 10 "holds," and one "strong sell." Any downgrades from this bunch could spell more trouble for the shares.
Technically speaking, the shares of EBAY are down nearly 12% since the beginning of 2010. The security has slipped below the support of its 10-week and 20-week moving averages, which are now serving as a layer of resistance, and has even dropped below key support at the 21 level.
Marvell Technology Group (MRVL)
Marvell Technology Group Ltd. (MRVL) attracted some heavy options trading on Monday, as more than 33,300 contracts changed hands. This jump in volume was more than double the stock's average daily trading volume of 16,134 contracts, according to data from WhatsTrading.com. Furthermore, options players were feeling optimistic, as approximately 85% of the volume fell on the call side.
Yesterday's preference for calls runs counter to the recent trend that we have seen on the ISE. During the past 10 trading sessions, nearly two puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 99% of all those taken during the past year, pointing to extreme skepticism.
In addition, the SOIR for MRVL comes in at 0.77, which is higher than more than half of the readings taken during the past year. This ratio also shows a bearish leaning among short-term options players.
From a technical perspective, the shares of MRVL are down more than 17% since the beginning of the year. After reaching a peak near 23 earlier this year, the stock has fallen below key support at its 10-week and 20-week moving averages and is now clinging to support in the 17 region.
Yahoo! Inc. (YHOO)
Options activity jumped on Yahoo! Inc. (YHOO) on Monday, as more than 65,800 contracts crossed the tape. This surge in volume was more than three times the stock's average daily trading volume of 18,587 contracts, according to data from WhatsTrading.com. What's more, roughly 93% of the volume changed hands on the call side.
Call trading on YHOO has been popular on the ISE. During the past two trading weeks, roughly five calls have been purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 78% of all those taken during the past year.
What's more, the SOIR for YHOO comes in at 0.55, which is lower than 71% of all those taken during the past 12 months. In other words, short-term options players have been more optimistically aligned toward the shares only 29% of the time during the past 12 months.
Short sellers are starting to unload their pessimistic positions. During the past month, the number of YHOO shares sold short dropped by 17% to 33 million. This accumulation of pessimistic positions accounts for less than 3% of the company's float and would provide little sideline money to fuel a rally in the shares.
Wall Street is split on the shares. Zacks reports that the security has earned 16 "buy" ratings, 16 "holds," and one "strong sell." Any downgrades could push the stock through key support.
Technically speaking, the shares of YHOO are down roughly 12% since the start of the year. The equity appears to be trapped in a sideways channel between support in the 14.50 region and resistance in the 18-19 region. The stock has been shuffling sideways since June 2009
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