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MEMC Electronic Materials Inc. Message Board

  • peterjanda peterjanda Jun 17, 2011 6:28 PM Flag

    Data Point from Options Market

    Funny - 7,633 call options struck at $9 and expiring in July 2011 were transacted today. The open interest as of Thursday was 2,477, which suggests somewhat deep pockets making a directional bet. It's typically tough to guage whether the investor(s) bought or sold the calls (thereby indicating bullish or bearish bias), but in this case it appears the calls were purchased presumably from market-makers. The implied volatility for the $9 strike increased about twice as much as the implied vols for the July $8 and $10 strikes, so it doesn't look like the investor was selling (which would depress prices and implied vols). WFR may finally begin catching bids next week.

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    • I forgot about short covering.. That said, I'd think that the decline from 25k oustanding June contracts suggests less short covering and, thereby, less bearish sentiment. One wouldn't know it from today's price movement, however.

    • Perhaps, but the June 10 calls had 25,000 expired calls which were purchased as a cover for shorting the equity, and more than likely contibuted to its 25% decline in a month. Cheap stocks usually get oversold, and short sellers love cheap stocks especially when they have debt. When WFR bottoms we should see a large volume reaction with 4x the daily average. If it just turns up here it may be a technical bounce that catchs more fish before resuming its down trend. Its been straight down for 4 months so you may be right about a turn, but I wouldn't have faith in it being sustained, unless we get a surprise on July 25th, but we've already been told the second quarter has charges for the Japan quake and expences are still elevated. Let the buyer beware