Positive Options Trends Bode Well for Tech IPOs

By David Russell, reporter at OptionMonster

Three technology companies plan to go public this week at the same time that options activity suggests improving sentiment in the sector.

OptionMonster's tracking systems have detected a shift in the last month as investors buy more calls than they sell while selling more puts than they buy. Calls are contracts that allow investors to buy a stock at a specified price, so they appreciate in value when stocks go up.

Puts are the opposite, letting an investor unload a stock at a given price -- even if it has dropped far below it -- so they're worth more when shares fall. The fact that investors are selling puts on companies such as Intel ( INTC), IBM ( IBM) and Research In Motion ( RIMM) reflects a broad confidence that the stocks won't decline significantly from current levels.

The tech sector is leading the offerings for initial public offerings this year for the first time since 2004, with $2.48 billion of volume, according to Dealogic. Real estate is in second place with $1.25 billion and financials, the leader in 2008 and 2009, has issued $1.17 billion of issuance.

This week's deals will add about $800 million to the total for tech. Smart Technologies, which makes electronic whiteboards for the educational and corporate markets, is expected account for the bulk of the volume with about $600 million of new shares.

RealD, a provider of 3D movie technology, will raise about $150 million, while intelligent data-search company Qlik Technologies will weigh in at about $100 million, according to data compiled by Dealogic and TheStreet.

Technology was the strongest sector in the S&P 500 last year, gaining about 54% versus 28% for the broader market. It faded in the first quarter and became the first industry group to start falling in the spring. Since then, however, it has been moving back into a leadership role and is down less than other sectors since the beginning of May.

The most bullish activity recently has focused on semiconductor names in particular, such as Micron Technology ( MU), Advanced Micro Devices ( AMD), Marvell Technology ( MRVL), and Intel.

OptionMonster's sector screening included computer makers, chip stocks, Internet companies, software providers, and producers of electronic equipment. Some 1.6 million option contracts traded across those categories on Monday.

That's 21% greater than average, even though volume across the broader marker was 20% below normal levels. Calls accounted for 60% of the activity, another sign of bullish sentiment.

More from Technology

GameStop Jumps 9% on Private Equity Buyout Rumors

GameStop Jumps 9% on Private Equity Buyout Rumors

Worth a Stunning $6.6 Trillion, Tech Stocks Have Taken Over the Market

Worth a Stunning $6.6 Trillion, Tech Stocks Have Taken Over the Market

Here's Why Snap Shares Climbed Monday

Here's Why Snap Shares Climbed Monday

Dropbox Soars in Third-Straight Record-Setting Session

Dropbox Soars in Third-Straight Record-Setting Session

Bitcoin Today: Prices Close to Flat in Low-Volume Trading

Bitcoin Today: Prices Close to Flat in Low-Volume Trading