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A few weeks ago, I both

wrote and

talked about how I was starting to take a bullish view of the online brokers. I based my thesis on the notion that, with the stock market hitting consecutive records, these firms should see improved trading volume and more assets under management, which will likely be reflected in improved second-quarter earnings.

So far, stocks like


(ETFC) - Get Report



(SCHW) - Get Report


TD Ameritrade

(AMTD) - Get Report

have mostly stood their ground. But I still expect analysts to start hiking their earnings estimates, and that should get the ball rolling toward higher prices.

The other wild card could be a renewal of consolidation activity in the industry. The name that keeps popping up in takeover talk is TD Ameritrade, which has seen a notable increase in call activity lately.

Today, the volume leader is the January 2008 LEAP $20 call, which has traded more than 8,010 contracts against prior open interest of 3,335 in the strike. Last week, the focus was on November $17.50 calls, which saw open interest triple to 24,000 contracts in the past two weeks.

The put/call ratio in TD Ameritrade has dropped to a 52-week low of 0.33 from 0.89 over the past five weeks. Typically, the put/call ratio is interpreted as a contrary indicator in which retail investors are chasing the latest tip or rumor. But with most of the volume focused on longer-term expirations and being executed in large block transactions, I take this activity as being conducted by "smart money" and therefore as a dose of bullishness.

Steven Smith writes regularly for 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 appreciates your feedback;

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