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Daily Stock Market Equity and Options Trading Commentary

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Wednesday, November 18, 2009

Most Active Stock Options November 18, 2009 & Trading Activity

The top ten most active option contracts traded today were:
  1. S&P 500 SPDR (SPY) November 111 Put Options
  2. S&P 500 SPDR November 111 Call Options
  3. PowerShares QQQ (QQQQ) November 44 Put Options
  4. S&P 500 SPDR November 110 Put Options
  5. S&P 500 SPDR November 110 Call Options
  6. Bank of America (BAC) November 16 Call Options
  7. Bristol Myers (BMY) December 30 Call Options
  8. Select Sector Financials SPDR (XLF) December 14 Put Options
  9. Bristol Myers December 30 Put Options
  10. PowerShares QQQ November 44 Call Options
It seems like the bearish betting outweighed the bullish betting today. It seems that someone is very bullish on Bank of America going into the options expiration this Friday. The November 16 calls are trading at a very slight premium to the actual stock, so someone is paying the premium to own the stock for these last 2 trading days. Looking at the open interest there seems to be the most interest around the 16 strike and then the 17.50 strike. If this market moves higher we could see Bank of America pin to the 17.50 strike as the derivative contracts are unwound, but that's a long shot in two days. I believe there may be some speculation as to who the new CEO for BAC could be which is why it traded quite a bit higher today on above average volume. It is very rare to see a Bristol Myers straddle being among the most active options traded, however we believe this is a bullish trade. If someone were very bearish I don't think they would be spending a ton of money purchasing in the money put options on BMY, so I believe someone is very bullish and this is a "synthetic stock" position. One would sell the 30 strike put options and buy the 30 calls. This would give them the stock for about a quarter less than current share price, and give them unlimited gains if the stock goes higher. We noticed this was on the breakout list of stocks to watch for Tuesday, therefore I believe someone is taking a very bullish bet on this stock.

I did not do too much trading today because I have been very busy with my retail website, but I did manage to sell at-the-money put options on Suntech Power for $65 per option contract. I did purchase the 14 strike puts to limit my losses, so I ended up taking $50 per contract for the spread. I believe Suntech (STP) is a safe play even if they report an ugly quarter, this is because of the news that came out last week. I think this is extremely good news, and on any weakness we could see buyers stepping in. Happy trading! Sphere: Related Content

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