Heavy Call Selling on Ameren Corp.

Ameren Corp. (AEE) has been a lightning rod for options activity today. In fact, some 60,100 contracts bets have changed hands on the stock, outstripping AEE's average daily volume of just 359 contracts. Making matters more interesting, WhatsTrading.com reports that practically all of this volume (99.99%) has traded on the call side of the coin.

Digging a bit deeper reveals that two large blocks of September 25 calls, totaling 60,000 contracts, traded at about 1:56 p.m. on the Philadelphia Stock Exchange (PHLX). These calls changed hands for the bid price of $3.50, or $350 per contract, resulting in a cool credit of $21 million. However, with AEE trading near $28.50 per share, these options are some 3.5 points in the money.

As such, it seems unlikely that the trader (or institution in this case) is betting on the stock plummeting below the $25 level by September expiration. Instead, these calls are likely related to an arbitrage play centering on AEE's ex-dividend, which takes place on Tuesday, Sept. 7.

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Retailers Attracting Notable Option Activity: Kohl's Corporation and Abercrombie & Fitch Co.

The retail sector received a boost on Thursday, as many companies reported consensus-beating August same-store sales.

Kohl's Corporation (KSS) followed the trend, revealing that its August same-store sales rose 4.5%, ahead of analysts' forecast of 2.6%. The stock responded favorably to this news, jumping roughly one point higher on Thursday to extend this week's rally. Now the retailer is docked well above its 10-day and 20-day moving averages, and is currently challenging the $50 level. KSS has not closed a session above $50 since June 23.

Option players were feeling bullish toward KSS on Thursday, with 14,000 calls changing hands. Over 4,600 contracts traded on the September 50 call -- the bulk of which traded at the ask price. Open interest at this strike increased by 2,762 contracts overnight, indicating that fresh bullish positions were added here. In other words, it seems that some traders are counting on KSS to soar past round-number resistance in the coming weeks.

Meanwhile, teen retailer Abercrombie & Fitch Co. (ANF) reported on Thursday that its same-store sales increased 6% in August -- narrowly beating the consensus estimate of 5.9%. Total sales for the month arrived at $353.7 million -- a 14% increase from the year-ago period.

These lackluster results had little effect on the stock, which has been hovering in the $35 to $37 neighborhood for the past few weeks. ANF is currently docked at $35.58, threatening to close the week above its 10-week trendline, which is located just below the $36 level.

Nearly 10,000 contracts traded on ANF's September 37 call on Thursday, with the bulk of these calls changing hands at the bid price, revealing they were likely sold. Open interest fell by some 2,600 contracts overnight, pointing to liquidation activity at this strike. In other words, it seems that some bulls are abandoning ship on ANF, by selling to close their out-of-the-money calls.

Despite Thursday's liquidation activity, the September 37 strike still houses peak call open interest of over 8,500 contracts. Should yesterday's trend continue, though, this configuration could soon change.

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Hot Stocks: TrueBlue Inc. and Blyth Inc.

The Dow Jones Industrial Average (DJIA) rocketed higher out of the gate this morning, as Wall Street cheered a stronger-than-expected August nonfarm payrolls report. The DJIA challenged resistance in the 10,450 region early in the session, but has since moderated its gain to about 70 points. Checking in with activity on the New York Stock Exchange (NYSE), we find that 2,056 stocks are advancing, while 729 are declining. Leading the bullish contingent is TrueBlue Inc. (TBI), with an advance of nearly 8%, while Blyth Inc. (BTH) has dropped more than 7% to lead the minority lower.

Global staffing companies are seeing a direct benefit from this morning's nonfarm payrolls report, which included a 17,000 gain in temporary employment. TrueBlue Inc. (TBI) is leading the sector higher, though the shares have stalled in the $12.60-$12.80 region. This area provided a floor for the stock in July and early August, and has apparently switched roles to become resistance. The stock's 20-week moving average is also perched in the region, and could provide an additional technical hurdle.

Sentiment on TBI is mixed. Options traders are bearishly aligned, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.33 ranks above 78% of all those taken in the past year. Meanwhile, five of the seven analysts following TBI rate it a "buy" or better. So far, the bears have been right, as the equity is down more than 21% since the start of 2010.

Yesterday, shares of Blyth Inc. (BTH) soared nearly 10% after the company lifted its 2011 earnings outlook to a profit of $3.05 to $3.35 per share. Today, the stock has plunged more than 7% after analysts at CL King downgraded the security to "neutral" from "strong buy." Clearly, the past 48 hours have been quite interesting for BTH investors, with the shares now trading back below short-term resistance in the $41-$42 region after being poised to fill in their early June bear-gap lower on Thursday.

On the sentiment front, BTH is not optionable, but that hasn't slowed down short sellers at all. More than 8% of the stock's float is currently sold short, after a plunge of 21% in short interest during the prior month. Lacking call options to hedge their bets, short sellers may have no choice to continue buying back BTH shares, especially if the stock recovers from this morning's downgrade.

-posted by Joseph Hargett (jhargett@sir-inc.com)
9/3/2010 11:06 AM

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Option Skews - Relatively Heavy Put Activity on Intel Corp., Aruba Networks, Inc., Marriott International Inc., and National Bank Of Greece SA

Intel Corp. (INTC), Aruba Networks, Inc. (ARUN), Marriott International Inc. (MAR), and National Bank Of Greece SA (NBG) were among those stocks that saw a skew toward put buying on Thursday.

Intel Corp. (INTC) makes its second appearance on the put skews listing this week, with traders betting on a continued decline from the semiconductor manufacturer. Wednesday's sector downgrade by Credit Suisse is sure to have a lingering effect on options activity as well.

Finally, Aruba Networks Inc. (ARUN) is another repeat put skews offender, with traders sending more than 4,500 of these bearishly aligned contracts across the tape yesterday.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

Other companies seeing a skew towards puts in the previous session: Macy's Inc. (M), Texas Instruments Inc. (TXN), LDK Solar Co., Ltd. (LDK), Freeport McMoRan Copper & Gold Inc. (FCX), Vale S.A. (VALE), First Solar Inc. (FSLR), Regions Financial Corp. (RF), Best Buy Co. Inc. (BBY), BHP Billiton Ltd. (BHP), Altera Corp. (ALTR), Honeywell International Inc. (HON), Itau Unibanco Holding S.A. (ITUB), International Rectifier Corp. (IRF), Excel Maritime Carriers Ltd. (EXM), Helix Energy Solutions Group (HLX), Wynn Resorts Ltd. (WYNN), Apollo Group Inc. (APOL), Fedex Corp. (FDX), Discover Financial Services (DFS), Prologis (PLD), ebay Inc. (EBAY).

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Option Skews - Relatively Heavy Call Activity on Brocade Communication Systems Inc. , Arena Pharmaceuticals Inc., Netflix Inc., and Microsoft Corp.

Brocade Communication Systems Inc. (BRCD), Microsoft Corp. (MSFT), Arena Pharmaceuticals Inc. (ARNA), and Netflix Inc. (NFLX), were among those stocks seeing a skew toward call buying on Thursday.

With Dell Inc. (DELL) bowing out of its bidding war with Hewlett-Packard Co. (HPQ) for 3PAR Inc. (PAR), many analysts have turned their attention to the rest of the network-storage sector for a possible replacement. Wedbush Securities analyst Kaushik Roy singled out Brocade Communication Systems Inc. (BRCD) as a solid alternative. "If Dell is following the footsteps of HP, then Dell should buy Brocade," Roy told Reuters on Thursday. The speculation surrounding BRCD was enough for traders on the International Securities Exchange (ISE) to buy-to-open more than 13,900 calls on the security. Since the bidding war for 3PAR began, BRCM has rallied more than 20%.

Arena Pharmaceuticals Inc. (ARNA) investors should expect to see more of the stock on our option skews listing as we approach Sept. 16. On this date, the Food and Drug Administration (FDA) will discuss the safety and efficacy of ARNA's application for its weight management drug lorcaserin hydrochloride (Lorqess). The stock has trended steadily lower since July 30, with resistance manifesting at the stock's 10-day moving average. This hasn't stopped options traders from snatching up call contracts, as evidenced by the more than 8,300 that were bought to open on the ISE yesterday.

Finally, Netflix Inc. (NFLX) has received some mixed attention recently. Despite the company's new partnership with Apple Inc. (AAPL) to stream content to the new Apple TV, analysts at ThinkEquity initiated coverage on the shares with a "hold" rating. Undeterred, NFLX bulls bought to open more than 5,000 calls on the ISE on Thursday. However, these call buyers may have more nefarious reasons for their purchases, as short interest jumped by more than 23% on NFLX during the most recent reporting period. Currently, about 23% of the stock's float has been sold short.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective

Other companies seeing a skew towards calls in the previous session: Citigroup Inc. (C), General Electric Co. (GE), Morgan Stanley (MS), Alcoa Inc. (AA), Burger King Holdings, Inc. (BKC), Research In Motion Limited (RIMM), Anadarko Petroleum Corp. (APC), Kohls Corp. (KSS), Abercrombie & Fitch Co. (ANF), F5 Networks Inc. (FFIV), Kinross Gold Corp. (KGC), Novartis AG (NVS), Home Depot Inc. (HD), EMC Corp. (EMC), Goodyear Tire & Rubber Co. (GT), Arcsight Inc. (ARST), Wells Fargo & Co. (WFC), Cree Inc. (CREE), Las Vegas Sands Corp. (LVS), United States Steel Corp. (X), Ford Motor Company (F).

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Option Skews - Relatively Heavy Call Activity on Brocade Communication Systems Inc. , Arena Pharmaceuticals Inc., Netflix Inc., and Microsoft Corp.

Brocade Communication Systems Inc. (BRCD), Microsoft Corp. (MSFT)Arena Pharmaceuticals Inc. (ARNA), Netflix Inc. (NFLX), were among those stocks seeing a skew toward call buying on Thursday.

With Dell Inc. (DELL) bowing out of its bidding war with Hewlett-Packard Co. (HPQ) for 3PAR Inc. (PAR), many analyst have turned their attention to the rest of the network-storage sector for a possible replacement. Wedbush Securities analyst Kaushik Roy singled out Brocade Communication Systems Inc. (BRCD) as a solid alternative. "If Dell is following the footsteps of HP, then Dell should buy Brocade," Roy told Reuters on Thursday. The speculation surrounding BRCD was enough for traders on the International Securities Exchange (ISE) to buy-to-open more than 13,900 calls on the security. Since the bidding war for 3PAR began, BRCM has rallied more than 20%.

Arena Pharmaceuticals Inc. (ARNA) investors should expect to see more of the stock on our option skews listing as we approach Sept. 16. On this date, the Food and Drug Administration (FDA) will discuss the safety and efficacy of ARNA's application for its weight management drug lorcaserin hydrochloride (Lorqess). The stock has trended steadily lower since July 30, with resistance manifesting at the stock's 10-day moving average. This hasn't stopped options traders from snatching up call contracts, as evidenced by the more than 8,300 that were bought to open on the ISE yesterday.

Finally, Netflix Inc. (NFLX) has received some mixed attention recently. Despite the company's new partnership with Apple Inc. (AAPL) to stream content to the new Apple TV, analysts at ThinkEquity initiated coverage on the shares with a "hold" rating. Undeterred, NFLX bulls bought to open more than 5,000 calls on the ISE on Thursday. However, these call buyers may have more nefarious reasons for their purchases, as short interest jumped by more than 23% on NFLX during the most recent reporting period. Currently, about 23% of the stock's float has been sold short.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective

Other companies seeing a skew towards calls in the previous session: Citigroup Inc. (C), General Electric Co. (GE), Morgan Stanley (MS), Alcoa Inc. (AA), Burger King Holdings, Inc. (BKC), Research In Motion Limited (RIMM), Anadarko Petroleum Corp. (APC), Kohls Corp. (KSS), Abercrombie & Fitch Co. (ANF), F5 Networks Inc. (FFIV), Kinross Gold Corp. (KGC), Novartis AG (NVS), Home Depot Inc. (HD), EMC Corp. (EMC), Goodyear Tire & Rubber Co. (GT), Arcsight Inc. (ARST), Wells Fargo & Co. (WFC), Cree Inc. (CREE), Las Vegas Sands Corp. (LVS), United States Steel Corp. (X), Ford Motor Company (F).

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Stocks Advancing Amid Heavy Short Interest: Vitacost.com Inc., Compellent Technologies Inc., Orexigen Therapeutics, Jackson Hewitt Tax Services

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

Methodology - the query scans a database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10% of their float sold short and showed a gain in the previous trading day. This can be used as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: Vitacost.com Inc. (VITC), Compellent Technologies Inc. (CML), Orexigen Therapeutics (OREX), Jackson Hewitt Tax Services (JTX), Dineequity Inc. (DIN), Vivus Inc. (VVUS), Saks Inc. (SKS), Cepheid (CPHD), Poniard Pharmaceuticals Inc. (PARD), La-Z-Boy Inc. (LZB), Digital River Inc. (DRIV), Flotek Industries Inc. (FTK), USG Corp. (USG), McClatch Company (MNI), G-III Apparel Group Ltd. (GIII), Liz Claiborne Inc. (LIZ), Charming Shoppes Inc. (CHRS), Buckle Inc. (BKE), Gencorp Inc. (GY), Great Atlantic & Pacific Tea Co. (GAP), Beazer Homes USA Inc. (BZH), Gaylord Entertainment Co. (GET), Sourcefire Inc. (FIRE), LDK Solar Co., Ltd. (LDK), Solarfun Power Holdings Co. Ltd. (SOLF).

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DJIA Futures Soar as U.S. Adds 67,000 Private Sector Jobs in August

Good morning! The Dow Jones Industrial Average (DJIA) is headed for an opening gain of nearly 100 points, as Wall Street cheers news that the U.S. economy added 67,000 private sector jobs in August. As for the S&P 500 Index (SPX), futures on the broad-market index are pointing toward a gain of more than 11 points, compared to indications for flat start to the session earlier this morning.

If you checked in with Opening View this morning, you know that both the DJIA and the SPX come into today trading above their respective 50-day moving averages. Additionally, the Dow has support at 10,150 and resistance at 10,450, while the SPX should find a floor near 1,080 and a ceiling near 1,100. Finally, the CBOE Market Volatility Index (VIX) closed below its 200-day moving average on Thursday. VIX watchers should keep an eye on this trendline, as well as resistance near the 28-29 level, should today's economic data disappoint.

Taking a closer look at this morning's economic data, the Labor Department reported that U.S. lost 54,000 nonfarm jobs in August, versus expectations for a drop of 105,000 jobs. Excluding census workers and other government employees, nonfarm payrolls expanded by 67,000 in August, more than doubling the consensus estimate for a 30,000 gain. The unemployment rate ticked higher to 9.6%, as expected. Average hourly earnings increased 3 cents, or 0.2% to $19.08, while the average workweek was unchanged at 34.2 hours.

Interested in having my pre-market analysis delivered directly to your inbox before the market opens? Then Sign Up Here for free daily delivery of Schaeffer's Opening View.

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LDK Solar Co. Ltd. Putting Pressure on Bears

LDK Solar Co. Ltd. (LDK) is extending its recent rally today, by soaring more than 6% to challenge its August highs. The stock has received a boost during the past couple of days. This morning, the company said that a new solar cell manufacturing line is expected to reach 120 MW by the end of the third quarter. What's more, LDK announced yesterday that it was suing Canadian Solar Inc. (CSIQ) for breach of a 10-year supply contract.

The stock has attracted a fair amount of negativity from investors, despite the stock's recent resurgence. For instance, the stocks' Schaeffer's put/call open interest ratio (SOIR) of 1.93 indicates that puts nearly double calls among options with less than three months until expiration. This ratio also ranks above 75% of all those taken in the past year.

Additionally, short interest accounts for a whopping 21% of LDK's total float. This heavy bearish sentiment could bode well for LDK bulls. If the shares continue higher, bearish investors could be forced to buy back their bets, thus adding to the equity's growing upward momentum.

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Gulf Explosion Prompts Spike in Mariner Energy and Apache Put Volume

As I'm sure you've heard by now, an explosion at an oil rig in the Gulf of Mexico is threatening to create another oil slick. The Mariner Energy Inc. (ME) rig exploded early this morning; all 13 crew members are now believed safe. According to the latest reports, there is a mile-long oil sheen spreading from the gulf platform. (UPDATE: Later reports referred to a fire on the rig, but it was unclear whether the fire was caused by an explosion.)

The explosion didn't go unnoticed by traders on Wall Street. ME has seen its put volume surge to more than 60,000 contracts, or about 355 times the stock's daily average volume. Nearly all of these options, 83% according to WhatsTrading.com, have been on the put side. The most popular is the September 20 put, where 26,664 contracts have changed hands on open interest of 575 contracts. Meanwhile, the September 22.50 put has seen 10,679 contracts trade.

Apache Corp. (APA) has also been heavily targeted by put traders. In April, APA offered to buy ME for $3.9 billion, including the assumption of $1.2 billion in debt. The deal is still pending, but that hasn't stopped options traders from sending more than 48,000 contracts across the tape - more than sextupling the stock's daily average volume of just 7,647 contracts. Like ME, most of this activity, 67.6%, has taken place on the put side.

At last check, ME had recovered from its earlier lows near $19.62 per share to trade down a mere 2.4%. APA was last seen down 1.8%.

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It's Been a Tumultuous Week for Saks Incorporated -- Yet Little Has (Technically) Changed

The retail sector is front-and-center today, with many reporting better-than-expected August same-store sales. Unfortunately, accessory king Saks Incorporated (SKS) did not follow this trend, with the retailer reporting that its same-store sales increased just 1% in August -- well beneath the consensus estimate of 4.3%.

SKS has been making headlines recently for other reasons, too. On Monday, rumors swirled that the company could be Wall Street's next acquisition target.

However, this roller-coaster week has done little to affect SKS, which still remains stuck beneath its 20-week moving average. This troublesome trendline, located around $8.50, has resisted the stock's rally attempts since mid-June.

Turning to today's activity, roughly 10,000 contracts have changed hands so far -- already three times the retailer's expected single-session volume. The September 7 put seems to have struck a chord with traders, as 8,384 contracts have traded on this strike -- 93% of which changed hands at the bid price, revealing they were likely sold. With today's volume exceeding open interest at this strike, it seems that a portion of these puts were, in fact, sold to open.

In other words, it appears that some traders are counting on the $7 level to provide support for SKS in the coming weeks. SKS is currently perched at $7.93.

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Human Genome Sciences Options Trader Bets on Stagnation

Are Human Genome Sciences Inc. (HGSI) shares caught in a trading range? At least one options trader thinks so. A block of 3,859 September 29 puts traded at 10:23 a.m. Eastern time on the New York Stock Exchange (NYSE) for the bid price of $0.55, or $55 per contract. At the same time, a block of 3,859 contracts September 31 calls crossed the tape for the bid price of $0.50, or $50 per contract. With both blocks marked "spread," it is likely that we are looking at the initiation of a short strangle on HGSI.

The trade breaks down like this: the trader receives a net credit of $1.05, or $105 per contract, for selling both the September 31 call and 29 put. However, he will only be able to keep the entire premium if HGSI closes between the $29 and $30 levels when September options expire on the 17th.

There is a little leeway, thought, as the breakeven points for the trade rest at $32.05 on the upside, and $27.95 on the downside. Any close outside of these breakeven points results in a loss on the trade. What's more, these losses could be potentially extreme, as there is no limit to how high HGSI can rally under the right circumstances.

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Hot Stocks: Movado Group Inc. and Burger King Holdings Inc.

The Dow Jones Industrial Average (DJIA) is trading in a tight range between support at its 50-day moving average and resistance in the 10,300 region today, with Wall Street reluctant to take a firm stance ahead of tomorrow's nonfarm payrolls report. Even a drop in weekly jobless claims and a rise in new home sales hasn't been enough to kick the bulls into rally mode. Checking in on the New York Stock Exchange (NYSE), we find that 1,898 stocks are trading in positive territory, while 918 are firmly in the red. On the upside, we have Burger King Holdings Inc. (BKC), with a gain of more than 24%, while Movado Group (MOV) is leading the way lower with a loss of nearly 9%.

3G Capital is about to "have it their way," after the company offered $24 per share, or $4 billion, for Burger King Holdings Inc. (BKC). Shares of the flame-broiled firm have rocketed more than 24% higher following the buyout bid, with BKC tagging an annual high of $23.50 per share. Today's rally brings BKC's two-day gain to more than 42%, as the stock rallied sharply on Wednesday due to buyout speculation.

Sentiment toward the shares is somewhat mixed. BKC's Schaeffer's put/call open interest ratio (SOIR) of 0.37 ranks below 77% of all those taken in the past year, while 14 of the 18 analysts following the stock rate it a "hold." Short sellers apparently saw a rally coming, as the number of BKC shorted shares plunged by 22.6% during the most recent reporting period. With more than 3% of BKC's float sold short, these bears could be in for considerable pain unless they hedged their bets by buying calls ahead of the buyout.

Investors just don't have time for watchmaker Movado Group Inc. (MOV) today, as the stock has plunged nearly 9% in response to the company's third-quarter earnings report. According to MOV, the company swung to a loss of 85 cents per share from a profit of 62 cents per share last year. Excluding items, MOV would have earned 12 cents per share, whiffing the consensus estimate for a profit of 62 cents per share. The company also lowered its fiscal 2010 forecast to a loss ranging from $1.40 to $1.50 per share, compared to analyst expectations for a full-year profit of 46 cents per share.

Today's plunge has pushed MOV back below former support at the $10 region. This area could now become a sticking point for the equity. Call options are currently quite popular on the security, as its SOIR of 0.11 ranks below 92% of all those taken in the past year. However, with short interest accounting for nearly 7% of MOV's total float, many of these calls could be hedges for short positions.

-posted by Joseph Hargett (jhargett@sir-inc.com)
9/2/2010 10:56 AM

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Option Skews - Relatively Heavy Put Activity on Advanced Micro Devices Inc., Petroleo Brasileiro SA, Caterpillar Inc., and Rowan Companies Inc.

Advanced Micro Devices Inc. (AMD), Petroleo Brasileiro SA (PBR), Caterpillar Inc. (CAT), and Rowan Companies Inc. (RDC) were among those stocks that saw a skew toward put buying on Wednesday.

International Securities Exchange (ISE) options traders appear to have shifted their focus toward technology stocks and the oil sector, which is a bit of an oddity given that just two days ago, call buying was heavy on both of these groups. However, given that the SPDR Technology Fund (XLK) and the Oil Service HOLDRS Trust (OIH) rallied 2.5% and 5.1%, respectively, on Wednesday, it makes me wonder if we are looking at smart money here.

Advanced Micro Devices Inc. (AMD) heads up our put skews listing, with more than 8,100 puts purchased in the wake of Credit Suisse's downgrade of the semiconductor sector. In a note to clients, the brokerage firm cut the group to "market weight" from "overweight, citing "a clear weakening of orders for computers and electronic products in data for June and July." AMD still joined in yesterday's rally, but remains trapped below its 10-day moving average, which has pressured the shares lower since late July.

Petroleo Brasileiro SA (PBR) could be in trouble this morning, as the stock has gained more than 2% in pre-market trading after the company announced details of a $43 billion oil-for-shares swap linked to a stock offering expected later this month. The shares have gapped above former resistance in the $35.50 region in early trading.

Finally, shares of Rowan Companies Inc. (RDC) are trading nearly 1% higher this morning, after RBC Capital lifted its price target to $31 per share from $28 per share. RDC has broken out above former resistance in the $28 region as a result, potentially putting pressure on yesterday's put buyers.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

Other companies seeing a skew towards puts in the previous session: Oracle Corporation (ORCL), Nokia Corp. (NOK), Texas Instruments Inc. (TXN), Macy's Inc. (M), Monsanto Co. (MON), F5 Networks Inc. (FFIV), Silver Wheaton Corp. (SLW), Silver Standard Resources (SSRI), Lam Research Corp. (LRCX), Frontline Ltd. (FRO), Starwood Hotels & Resorts (HOT), Precision Castparts Corp. (PCP), LDK Solar Co., Ltd. (LDK), Atheros Communications, Inc. (ATHR), Vale S.A. (VALE), Virgin Media Inc. (VMED), Corning Inc. (GLW), Moody'S Corporation (MCO), Juniper Networks Inc. (JNPR), Lexmark International Inc. (LXK), Annaly Capital Management (NLY).

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Option Skews - Relatively Heavy Call Activity on Ford Motor Company, Brocade Communication Systems Inc., CVS Caremark Corp., and Research In Motion Limited

Ford Motor Company (F), Brocade Communication Systems Inc. (BRCD), CVS Caremark Corp. (CVS), and Research In Motion Limited (RIMM) were among those stocks seeing a skew toward call buying on Wednesday.

Call options dominated the landscape for Ford Motor Company (F) on the International Securities Exchange (ISE) yesterday, with more than 19,000 of these bullishly oriented contracts changing hands. Not all of F's options volume was bullish on Wednesday, as my colleague Andrea Kramer can attest to. Driving yesterday's activity was a broad rally in the overall market, and a somewhat solid August sales report. Specifically, F said that August sales were down 5% from July, but that year-to-date fleet sales were up 35%, while commercial fleet sales were up 82% from the same period last year.

Brocade Communications Systems Inc. (BRCD) has seen unusually heavy call volume recently, and this trend continued into Wednesday's activity. Nearly 7,000 calls changed hands on BRCD, even though the stock was not the subject of any significant headline news. Short sellers could be one driver for the recent call attention, as more than 4% of the stock's float is currently sold short. With BRCD reclaiming long-term support in the $5 region, these short sellers may be hedging their bets against a continued rally in the stock.

Finally, Research In Motion Limited (RIMM) was another favorite among ISE call buyers yesterday, despite receiving a downgrade to "market perform" from "outperform" at JMP Securities. Technically, RIMM is trading below long-term support/resistance in the $45 region.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective

Other companies seeing a skew towards calls in the previous session: Citigroup Inc. (C), Bank Of America Corp. (BAC), Microsoft Corp. (MSFT), Transocean Ltd. (RIG), Las Vegas Sands Corp. (LVS), Novartis AG (NVS), MGIC Investment Corp. (MTG), Intel Corp. (INTC), Burger King Holdings, Inc. (BKC), Coinstar Inc. (CSTR), QUALCOMM Inc. (QCOM), Cisco Systems Inc. (CSCO), JPMorgan Chase & Co. (JPM), Sonus Networks Inc. (SONS), Foster Wheeler AG (FWLT), Symantec Corp. (SYMC), Sotheby 's (BID), Finisar Corporation (FNSR), Gap Inc. (GPS), Savient Pharmaceuticals (SVNT), Auxilium Pharmaceuticals (AUXL).

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Stocks Advancing Amid Heavy Short Interest: First Bancorp Holding Co., Novavax Inc., G-III Apparel Group Ltd., Jos. A. Bank Clothiers

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

Methodology - the query scans a database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10% of their float sold short and showed a gain in the previous trading day. This can be used as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: First Bancorp Holding Co. (FBP), Novavax Inc. (NVAX), G-III Apparel Group Ltd. (GIII), Jos. A. Bank Clothiers (JOSB), Blue Coat Systems Inc. (BCSI), KB Home (KBH), Bon Ton Stores Inc. (BONT), Orient Express Hotels Ltd. (OEH), Emeritus Corp. (ESC), MGIC Investment Corp. (MTG), Longtop Financial Tech Limited (LFT), Officemax Inc. (OMX), Beazer Homes USA Inc. (BZH), M&F Worldwide Corp. (MFW), Talbots Inc. (TLB), Wabash National Corp. (WNC), Arvinmeritor Inc. (ARM), Fuqi International, Inc. (FUQI), Select Comfort Corp. (SCSS), Cirrus Logic Inc. (CRUS), A123 Systems Inc. (AONE), Lodgenet Interactive Corp. (LNET), Powerwave Technologies Inc. (PWAV), Eastman Kodak Co. (EK), Patriot Coal Corp. (PCX).

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DJIA Heads for Minor Gains as Jobless Claims Fall by 6,000

Good morning! The Dow Jones Industrial Average (DJIA) is headed for an opening gain of about 16 points, as Wall Street digests a decline in weekly jobless claims and a 1.8% drop in second-quarter productivity. As for the S&P 500 Index (SPX), futures on the broad-market index are pointing toward an opening gain of roughly 3 points, compared to indications for an advance of about 2 points earlier this morning.

If you checked in with Opening View this morning, you know that the Dow comes into today trading back above support in the 10,250 region and its 50-day moving average. More stalwart support lies in the 10,150-10,100 region, while resistance could materialize near 10,350. As for the SPX, the index is currently capped by its 20-day and 50-day moving averages, with additional resistance in the 1,085 region. Support, meanwhile, lies in the 1,070 region.

Taking a closer look at this morning's economic data, the Labor Department reported that initial jobless claims fell by 6,000 to 472,000 in the latest week. The four-week average of initial claims declined 2,500 to 485,500. Overall, 9.7 million people were collecting some type of unemployment benefits last week, down from 10.1 million on an unadjusted basis.

Also, productivity fell a revised 1.8% in the second quarter, doubling initial estimates from the Labor Department. Worker output grew at a slower pace, with real output rising just 1.6% in the second quarter, compared to the prior estimate of 2.6%. Hours worked rose at a 3.5% annualized rate - the fastest in four years.

Interested in having my pre-market analysis delivered directly to your inbox before the market opens? Then Sign Up Here for free daily delivery of Schaeffer's Opening View.

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On the Radar: Blue Coat Systems, Research In Motion Limited, and BB&T Corporation

The major market indexes are kicking off September with major gains today, and so there's certainly no shortage of stocks on the move. A few equities that caught my eye are Blue Coat Systems, Inc. (BCSI), which named a new CEO last night; Research In Motion Limited (RIMM), which was hit with a downgrade this morning; and BB&T Corporation (BBT), which was the target of a volatility spread earlier in the session. Here's a quick look at these noteworthy stocks.

• First up, BCSI announced late Tuesday that IBM (IBM) alum Michael Borman will succeed Brian NeSmith as president and CEO. Analysts at Needham Research offered their stamp of approval on the management shake-up, raising BCSI to "buy" from "hold" bright and early this morning. The stock is up 13.5% at last check, and BCSI will now have a chance to wrap up the week above resistance at its 10-week moving average.
• Meanwhile, RIMM was cut to "market perform" from "outperform" at JMP Securities, which is just the latest in a string of negative analyst notes for the BlackBerry parent. However, RIMM has shrugged off the downgrade to add 3.3% this afternoon. With the stock's 10-day International Securities Exchange (ISE) put/call volume ratio resting at 1.80, in the 99th annual percentile, and the equity's Relative Strength Index (RSI) docked at 30 -- right on the cusp of oversold territory -- it seems that there just wasn't any room to price in more pessimism amid today's widespread rally.
• Finally, BBT was targeted by a strangle speculator today, with the options player buying 5,000 October 22 puts and 5,000 October 23 calls. The shares are up 3.3% this afternoon to trade at $22.84, right between these two strikes. By initiating this directionally neutral play, the speculator is simply betting on a major move higher or lower during the next six weeks until expiration.

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Call Volume Spikes, Relatively Speaking, on G-III Apparel Group, Ltd.

The shares of G-III Apparel Group, Ltd. (GIII) typically fly under the radar of most options traders. Fewer than 200 call contracts have changed hands on the stock so far today, but this actually represents about 39 times the equity's expected daily call volume of just 5 contracts.

For the record, GIII's December 30 call is most active, with a whopping 63 contracts crossing the tape -- 76% at the ask price, suggesting they were purchased. With only 21 calls in open interest at the December 30 strike, it's safe to assume that new contracts are being added here today.

Today's relative flurry of call volume was inspired by GIII's latest earnings report, which hit the Street this morning. The apparel company posted an unexpected second-quarter profit, and simultaneously hiked its full-year earnings forecast. The stock has surged nearly 19% as a result, with GIII rebounding from its 50-week moving average, and reclaiming a perch above its 10-week and 20-week trendlines in the process.

Unlike options traders, short sellers have taken a keen interest in GIII. Currently, short interest accounts for 10% of the equity's float, or roughly 15 times the stock's average daily trading volume. As these bears hit the exits, GIII should have no trouble maintaining its post-earnings momentum.

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Options in Play: MGM Resorts International and Dendreon Corporation

Put volume is unusually heavy today on MGM Resorts International (MGM) and Dendreon Corporation (DNDN). While the casino company and the biotech firm don't have a whole lot in common, today's option activity on the duo is eerily similar -- both MGM and DNDN have been targeted by put players looking to adjust the time frame of their respective trades.

Starting with MGM, put volume has accelerated to five times the norm, with roughly 21,000 contracts crossing the tape so far. The day's biggest trades have taken place at MGM's September 12 put and October 12 put, where it looks like a speculator is rolling out a front-month position to the back-month series.

Puts have been increasingly popular on MGM lately, as evidenced by the stock's 10-day International Securities Exchange (ISE) put/call volume ratio of 1.09, in the 83rd annual percentile. Considering the gaming issue's technical woes, this skeptical skew isn't really surprising -- despite a 3% gain today, MGM has declined under pressure from its 10-day and 20-day moving averages since early August.

Put volume is also heavier than usual on DNDN, with activity rising to three times the norm. About 8,600 contracts have traded so far, and it looks like the biotech issue is also attracting rollout volume today. Specifically, one bearish bettor sold a few blocks of October 30 puts, and simultaneously purchased a couple of matching blocks of November 30 puts.

Traders learned last night that a Medicare agency has set Nov. 17 as the date to review data on Provenge, DNDN's prostate cancer treatment, so options players could be adjusting their hedges accordingly. It's also possible that these are new bearish bets, since the almost prohibitively high cost of treatment with Provenge has prompted skepticism about Medicare approval. At last check, DNDN was up 6.8% to trade at $38.28, placing those 30-strike puts well out of the money.

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Hot Stocks: Spartech Corp. and Brown Forman Corp.

The Dow Jones Industrial Average (DJIA) has soared more than 230 points heading into the noon hour on Wall Street, as hope for a renewed upturn in the global economic recovery is overshadowing a decline in U.S. private payrolls. Checking in on the New York Stock Exchange (NYSE), we find that 2,619 stocks are trading in positive territory, while 264 are firmly in the red. On the upside, we have Spartech Corp. (SEH), with a gain of more than 5%, while Brown Forman Corp. (BF'B) is leading the minority lower with a loss of nearly 6%.

While Spartech Corp. (SEH) is not the biggest gainer on the session -- that designation belongs to Burger King Holdings Inc. (BKC) -- SEH has put in a respectable performance, and was the No. 2 advancing issue earlier this morning. The stock is apparently piggybacking on the solid second-quarter earnings report from competitor Raven Industries Inc. (RAVN), as there is no discernable headline news for SEH. Technically speaking, SEH's rally has stalled near resistance in the $9.50 region, which is home to the stock's declining 20-day moving average. SEH has not closed a session above this trendline since July 29.

Sentiment toward the shares is pretty bearish, as SEH's Schaeffer's put/call open interest ratio (SOIR) of 1.41 arrives just six percentage points shy of an annual peak, while nearly 4% of the equity's float is sold short. However, if SEH fails to take advantage of a rival's success and a strong rally in the broader market, these bears are not going to be in any rush to buy back their bets. What's more, with SEH down more than 12% year to date, this negativity has very little contrarian impact.

Shares of Brown Forman Corp. (BF'B)were last seen lower by more than 6%, recovering from an earlier loss of about 11.5%. Investors were not please with the Jack Daniels maker's quarterly profit of 76 cents per share, especially when Wall Street was looking for earnings of 83 cents per share. Still, BF'B has recovered, and is currently trading above its 32-week moving average and its July lows in the $57 region.

Speaking analysts, Zacks reports that none of the five brokerage firms following BF'B rate the stock a "sell." What's more, the four "hold" ratings that have been levied against the stock could make up the difference if the analyst community decides to downgrade BF'B in the wake of its quarterly report.

-posted by Joseph Hargett (jhargett@sir-inc.com)
9/1/2010 11:10 AM

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Short Sellers on Notice as Travelzoo Inc. Passes Another Subscriber Milestone

Shares of online travel website Travelzoo Inc. (TZOO) have jumped nearly 7% so far this morning, as the company reported that is has passed yet another milestone: 500,000 subscribers in Spain. The report is the latest in a string of impressive subscriber targets, including hitting the 1 million mark in Germany on Aug. 27, and the 2 million subscriber mark in the U.K. on Aug. 12.

If this stock is not on your radar yet, it should be. TZOO has gained more than 48% in 2010, with the stock soaring some 36% since hitting a near-term bottom near $14 per share on Aug. 24. The shares are now poised to challenge the round-number $20 area, which marked TZOO's highs in April.

Such a breakout would be a coup for TZOO bulls, as the stock has attracted quite a bearish following on the sentiment front. For instance, more than 17.6% of the equity's float is currently sold short. Since TZOO is not optionable, these shorts do not have access to call options to hedge their positions, meaning that a break above $20 per share could spark a considerable short-covering rally.

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Option Skews - Relatively Heavy Put Activity on General Electric Co., Best Buy Co. Inc., CF Industries Holdings, NetEase.com Inc.

General Electric Co. (GE), Best Buy Co. Inc. (BBY), CF Industries Holdings (CF), and NetEase.com Inc. (NTES) were among those stocks that saw a skew toward put buying on Monday.

General Electric Co. (GE) makes its third appearance on the put skews listing in two weeks, and despite some reorganization at the company's GE Capital arm, there is little in the way of news driving this activity. The stocks do go ex-dividend on Sept. 19, but those traders looking for an arbitrage play typically opt for calls over puts. Traders could be positioning themselves for an eventual breakout by the shares, which have traded between the $14 and $17 levels since June, as a breach of the lower rail of this trading range could send the stock down for a test of support near $10.

Elsewhere, Best Buy Co. Inc. (BBY) and NetEase.com (NTS) are making their first appearance on the put skews charts in some time, though, like GE, neither has any real driving headline news. BBY has taken a technical turn for the worse, heading toward round-number support near $30 per share, while NTES is looking to break out to near-term highs, as the shares challenge round-number resistance in the $40 region.

Finally, it looks like yesterday's CF Industries Holdings (CF) put buyers will be rewarded today, as the stock has been downgraded to "market perform" from "outperform" at BMO Capital Markets for valuation reasons. CF has been on a tear higher during the prior three months, with the shares soaring some 60% after touching a low of $57.56 in early June.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's put volume on the ISE is at least twice as great as the call volume. It then sorts the stocks based on the put volume. Since this is buy-to-open data, this can be a good source for finding stocks where skepticism is emerging. Of particular interest to me would be situations where we see put activity on stocks that are still in intermediate-term uptrends. This would be a potentially encouraging sign from the contrarian perspective.

Other companies seeing a skew towards puts in the previous session: Caterpillar Inc. (CAT), Eldorado Gold Corp. (EGO), Macy's Inc. (M), Coca Cola Co. (KO), Molex Inc. (MOLX), Frontline Ltd. (FRO), Visa Inc. (V), Green Mountain Coffee Roasters Inc. (GMCR), 3M Company (MMM), Leap Wireless International Inc. (LEAP), Limited Brands Inc. (LTD), Freeport McMoRan Copper & Gold Inc. (FCX), Broadcom Corporation (BRCM), First Solar Inc. (FSLR), Mastercard Incorporated (MA), Tyco Electronics Ltd. (TEL), Edwards Lifesciences Corp. (EW), Omnivision Technologies Inc. (OVTI), Marvell Technology Group (MRVL), Apache Corp. (APA), Capella Education Company (CPLA).

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Option Skews - Relatively Heavy Call Activity on Intel Corp., Exxon Mobil Corp., Citigroup Inc., and Schlumberger Ltd.

Intel Corp. (INTC), Exxon Mobil Corp. (XOM), Citigroup Inc. (C), and Schlumberger Ltd. (SLB) were among those stocks seeing a skew toward call buying on Monday.

Aside from a few notes regarding Intel Corp.'s (INTC) acquisition of Infineon's wireless business, there was very little news driving activity on yesterday's leading call skews candidates. However, I do find it rather interesting that the majority of those stocks attracting call buying activity belong to two sectors: technology and oil.

On the tech side, Intel is joined by Microsoft Corp. (MSFT, Apple Inc. (AAPL), Symantec Corp. (SYMC), and QUALCOMM Inc. (QCOM), just to name a few. It may also come as a surprise that the tech sector was among the worst performing in August, with the tech-laden Nasdaq Composite (COMP) plunging 6.2% during the month. What's more, the PowerShares QQQ Trust (QQQQ) dropped 5.1% in August, while the SPDR Technology Fund (XLK) lost 5.6% last month. With the sector's price action struggling, and Gartner cutting its second-half PC shipment growth outlook, this rising attention to call buying on the group does not inspire confidence from a contrarian perspective.

Oil is a smaller contingent on today's calls skews listing, with Exxon Mobil Corp. (XOM) being accompanied by Schlumberger Ltd. (SLB), Valero Energy Corp. (VLO), and Anadarko Petroleum Corp. (APC), among others. Still, this doesn't negate the fact that we are seeing call buying on an underperforming sector. Specifically, the Oil Service HOLDRS Trust (OIH) dropped 7.4% in August, while the AMEX Oil & Gas Index (XOI) fell 5.4%, and crude prices plunged 8.7% for the month. Once again, traders should keep a close eye on these stocks, as call buying on declining issues typically is not a good sign.

This filtered scan is based on the International Securities Exchange (ISE) buy-to-open data. It looks for stocks where the previous day's call volume on the ISE is at least twice as great as the put volume. It then sorts the stocks based on the call volume. Since this is buy-to-open data, this can be a good source for finding stocks where optimism is emerging. Of particular interest to me would be situations where we see call activity on stocks that are still in intermediate-term downtrends. This would be a potentially cautionary sign from the contrarian perspective

Other companies seeing a skew towards calls in the previous session: Apple Inc. (AAPL), Microsoft Corp. (MSFT), Symantec Corp. (SYMC), Hertz Global Holdings Inc. (HTZ), Valero Energy Corp. (VLO), Anadarko Petroleum Corp. (APC), Interpublic Group of Companies Inc. (IPG), SanDisk Corporation (SNDK), QUALCOMM Inc. (QCOM), Cavium Networks, Inc. (CAVM), Newmont Mining Corp. (NEM), MBIA Incorporated (MBI), Genzyme Corp. (GENZ), STEC Inc. (STEC), EZchip Semiconductor Ltd. (EZCH), Morgan Stanley (MS), Southwestern Energy Co. (SWN), TiVo Inc. (TIVO), Hecla Mining Company (HL), Suntrust Banks Inc. (STI), American International Group (AIG)

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Stocks Advancing Amid Heavy Short Interest: Saks Inc., Energy Conversion Devices, Central Pacific Financial Corp., Microvision Inc.

As explained in our education section, short interest is a useful sentiment indicator that measures the level of investor pessimism toward a stock. While it isn't always a simple "long only" indicator, it can give you insight into situations where you might see concentrated buying demand. The purpose of this post is to highlight heavily-shorted stocks that could be in the midst of a potential short covering rally. More details about the methodology are listed below.

Methodology - the query scans a database of companies which has some basic filters to eliminate stocks that don't trade frequently. The table above is a filtered list of stocks that have at least 10% of their float sold short and showed a gain in the previous trading day. This can be used as a tool for finding situations where stocks with heavy short interest have begun to move.

Companies included in today's scan are: Saks Inc. (SKS), Energy Conversion Devices (ENER), Central Pacific Financial Corp. (CPF), Microvision Inc. (MVIS), Rex Energy (REXX), China Biotics Inc. (CHBT), Select Comfort Corp. (SCSS), Ambac Financial Group Inc. (ABK), Compucredit Holdings Corp. (CCRT), Flotek Industries Inc. (FTK), Hecla Mining Company (HL), Jazz Pharmaceuticals, Inc. (JAZZ), JA Solar Holdings Co. Ltd. (JASO), G-III Apparel Group Ltd. (GIII), DG Fastchannel Inc. (DGIT), Monro Muffler Brake Inc. (MNRO), Republic Airways Holdings (RJET), Dillards Inc. (DDS), Wilmington Trust Corp. (WL), Isilon Systems Inc. (ISLN), Delcath Systems Inc (DCTH), Evergreen Solar Inc. (ESLR), Scholastic Corp. (SCHL), Freightcar America Inc. (RAIL), Olympic Steel Inc. (ZEUS)

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DJIA Futures Slip After Private Payrolls Drop by 10,000

Good morning! The Dow Jones Industrial Average (DJIA) is headed for an opening gain of about 80 points, as futures pull back from their earlier highs following an unexpected decline in the ADP private payrolls report - the first of three key employment reports this week. As for the S&P 500 Index (SPX), futures on the broad-market index are pointing toward an opening gain of 11 points, compared to indications for an advance of about 12 points earlier this morning.

If you checked in with Opening View this morning, you know that the DJIA has support at 10,000 and 9,950, while resistance lingers overhead in the 10,100 area. As for the SPX, support resides at 1,040, while resistance appears to be growing in the 1,060 region.

Taking a closer look at this morning's economic data, private sector employment fell 10,000 in August, according to ADP. The report is seen as a precursor to Friday's official nonfarm payrolls report.

Interested in having my pre-market analysis delivered directly to your inbox before the market opens? Then Sign Up Here for free daily delivery of Schaeffer's Opening View.

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