Call Activity Swells As Alcoa Recovers

AA - Alcoa, Inc. - Shares of aluminum producer, Alcoa, recovered significantly today, rising 8% to $12.90. Bullish investors hoping the stock continues to rebound purchased call options in the December contract. Approximately 5,200 calls were coveted at the December 13 strike for an average premium of 69 cents apiece. Shares of Alcoa must rally another 6% before investors breakeven at a price of $13.69. Call volume at the January 14 strike exceeded existing open interest nearly two-fold. Approximately 32,700 calls were exchanged at that strike versus existing open interest of just 18,094. It appears some traders purchased 18,690 calls for an average premium of 76 cents each. A large percentage of the call volume represents fresh activity. Although some portion of today’s volume at the December 14 strike could be the work of investors closing out existing positions.

AVP - Avon Products, Inc. - The global manufacturer of beauty products suffered sharp share-price declines at the start of the session, but recovered by midday to stand just 2% lower at $32.39. Avon posted a 30% decline in profits for the third-quarter versus the prior year. Earnings came in at 36 cents per share, hurt by the stronger dollar, which reportedly lowered revenue by 11%. Bearish traders threw in the towel on AVP, salvaging whatever premium they could by selling out-of-the-money call options in the November contract. The November 35 strike had 2,300 calls shed for 10 pennies apiece while the lower November 34 strike had 1,600 calls sold for 20 cents each. Call sales suggest investors expect no miracles ahead of expiration next month.

RDC - Rowan Companies Inc. - While shares of the domestic and international oil and gas drilling company are almost 4% higher after taking a drubbing during the course of this week, we note once again the growing pace of bearish put option plays in the January and April expiration months. Shares are trading at $24.57 and once again the January 25 and 22.5 strikes are most popular with today’s volume at the higher strike here almost four times the prevailing open interest of 2,731. Indeed both strikes have witnessed bearish posturing in the space of the last five days with open interest at both strikes growing from 2,500 to more than 7,000 contracts. Today’s volume will likely add a further 12,000 lots banking on a price decline at Rowan. The catalyst is likely the third quarter earnings data due on November 3 next week. The environment for the company has been harsh while in the medium term the prospects ought to improve. The issue for investors today is whether those future prospects are fully discounted in the prevailing share price. The bearish options positioning could therefore be the work of brave heart investors who dove into the stock, which has risen from $10 in March.

PLL - Pall Corp. - The supplier of filters to the Life Sciences and Industrial markets experienced a 5% rally in shares to $33.82 today. Perhaps the bullish move in share price stems from news that Credit Suisse AG reported the firm may be a takeover target. Option bulls reacted to the speculation by purchasing nearly 4,000 calls at the November 35 strike for an average of 85 cents per contract. Traders holding the call options will bank profits if shares of PLL increase 6% over the current price to surpass the breakeven point at $35.85 by November’s expiration day.

FSLR - First Solar, Inc. - Analysts at Barclays maintained an ‘equal weight’ rating on the manufacturer of solar modules today, but reduced the target share price to $150.00 from $160.00 citing weaker-than-expected third-quarter earnings. Meanwhile, FSLR’s target was slashed to $140.00 at Citigroup where FSLR is labeled as ‘hold’. Shares of First Solar are currently trading 17% lower to $125.64 despite reporting earnings of $1.79 per share that beat average expectations by about 5 cents. Option traders exchanged more than 40,000 contracts as of 10:15 am (EDT). Investors are initiating fresh call positions in the November contract at the November 125/130/140 strike prices.

MOT - Motorola, Inc. - Shares of the telecom company are soaring 9% higher to $8.68 after the firm posted its second consecutive quarter of positive profits. Positive guidance for the next quarter also helped lift shares as MOT forecast earnings of 7 to 9 cents per share. Option traders feasted on call options in the first 45 minutes of the trading session, exchanging more than 13 calls on the stock for each put option in play. Nearly 40,000 contracts changed hands on MOT as of 10:25 am (EDT).

AKAM - Akamai Technologies, Inc. - The provider of internet solutions and services posted third-quarter earnings of 38 cents per share, which exceeded average expectations of 35 cents per share. The stock is trading 11% higher to $22.39 as of 10:30 am (EDT). Early morning call activity could be the work of investors initiating bullish positions on the stock. Otherwise, traders are banking gains on the rally in shares.

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