While there hasn't been a tectonic shift in the options landscape since
last week, a subtle movement that's worth noting has occurred over the past few days.
The put/call ratio, which had been running at levels between 0.8 to 1.2 for the last two weeks, has dropped down to a range of 0.54 to 0.81 over the past three trading days.
"The retail investor is still nowhere to be found, but the institutions are starting to establish speculative longs through bullish call positions," said Brian Richardson, chief option strategist with M&W Investments, a New York money management firm.
Richardson believes money managers feel that despite some lofty premiums, options still offer a "better way in terms of cost and leverage to get ahead of any ensuing rally, rather than buying stock."
A good example of that line of thinking was the purchase of 75,000 March $26
Nasdaq 100 Unit Trust
calls on Monday.
Some speculative call-buying has emerged in
, which had been posting tremendous put activity for the past two weeks. "Over the past two days we've seen some nibbling in both the April and May $80 calls," Richardson said. "Call activity is actually beginning to match the put side."
Other technology issues where call volume has picked up include
Cadence Design Systems
, which saw open interest in the May $10 calls more than triple to 4,200 contracts over the past two days. Cadence just recently traded above resistance at $10. The
also saw the May call open interest surge, particularly in the just-out-of-the-money $25 strike.
"Clearly the market's ability to hold above the Feb. 13 lows and stage several reversal days has managers fingering the trigger," said Gary Lin, a market strategist with Morgan Stanley. "Performance has been so poor that they feel they can't afford to miss a move."
Other stocks that have seen an increase in call activity are in the financial arena, notably
But Lin thinks one shouldn't read too much into this action, noting that open interest in the index options such as the
is still weighed to the put side, with a ratio of 1.62 for the March series.
"What we're seeing is an incipient move toward trying to get long in anticipation of that long-rumored second-half recovery," Lin said. "That's why people are using longer-dated calls to dip their toes in the market here."
Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He invites you to send your feedback to