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Upgrade Attracts Call Buyers to Yum! Brands, Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 3:18:06 PM

This morning, analysts at UBS raised their rating on of Yum! Brands, Inc. (YUM) from "neutral" to "buy." Since the upgrade, option activity on YUM has soared to triple the stock's daily average, with 16,000 contracts changing hands so far today.

Specifically, call activity on YUM has spiked to eight times the daily average, with 9,505 calls traded. Today's preference for calls is in line with recent activity on the International Securities Exchange (ISE), which sports a 10-day call/put volume ratio of 4.12, in the 96th annual percentile. In other words, speculators have bought to open calls at a much faster pace than usual during the past two weeks.

Furthermore, the stock's Schaeffer's put/call open interest ratio (SOIR) checks in at 0.87, in the 32nd annual percentile, indicating that short-term speculators have been more bullish toward YUM just 32% of the time during the past year.

The back-month April 37 call has seen the most activity today, with 2,724 contracts trading on open interest of 1,858 at this strike, pointing to the addition of fresh positions. What's more, 71% of these calls traded at the ask price, implying that they were bought. By buying to open the April 37 call, the bullish speculator is hoping YUM will exceed the $37 level by April expiration, rendering his position in the money.

An hour ahead of the close, YUM had claimed 3.5% to flirt with $36.64.

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The Allstate Corp. Sees Heavy Call Volume Ahead of Ex-Dividend Date

Joseph Hargett (jhargett@sir-inc.com)

3/9/2010 2:54:41 PM

The Allstate Corp. (ALL) has attracted quite a bit of attention from options traders this afternoon. Specifically, more than 140,000 contracts have changed hands on ALL, outstripping the stock's daily average trading volume by more than 17 to one. Additionally, calls account for more than 99% of this volume, according to data from WhatsTrading.com.

Drilling down on the activity, it appears that most of this call volume has been sold. For instance, two blocks of 5,020 contracts traded on the in-the-money March 21 call for the bid price of $0.92 on the Chicago Board Options Exchange (CBOE) at about 12:23 p.m. Eastern, indicating that these contracts were likely sold to open.

Why would a trader sell so many in-the-money calls? The likely explanation is that tomorrow is Allstate's ex-dividend date, and this trader has entered a dividend capture play.

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Call Volume Amplifies on AT&T Inc.

Sarah Wasserman (swasserman@sir-inc.com)

3/9/2010 1:41:09 PM

Option activity has been abuzz on AT&T Inc. (T) today, with the communications concern seeing three times its average daily volume. Calls have been especially popular on T today, with 26,000 of these bullish bets trading so far.

Drilling down on specific activity, it appears the back-month series has had particular appeal for option players. The April 26 call has seen traffic of 8,002 calls cross the tape today, with over half trading at the ask price, suggesting they were bought. However, with open interest at this strike currently checking in 22,174 contracts, we cannot yet determine whether today's activity will translate into new positions.

The April 25 call has also seen high volume today, with 3,237 contracts changing hands. With 74% of these calls trading at the bid price, it appears a portion of these calls were sold. There are 18,659 contracts presently in place at this strike, so we'll have to wait until tomorrow to verify whether these calls were sold to open, or sold to close.

The International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) report a 10-day call/put volume ratio of 7.08, which ranks in the 100th annual percentile. In other words, speculators are showing greater preference for calls now than any other time during the past year.

Elsewhere on the Street, analysts are split toward T. According to Zacks, 17 out of 33 analysts rate the equity a "buy" or better, with the remaining 16 analysts deeming T a "hold."

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GT Solar International (SOLR) Garners Bearish Attention in the Options Pits

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 12:03:33 PM

GT Solar International, Inc. (SOLR) succumbed to selling pressure on Monday, thanks to sector woes induced by fellow solar concern Yingli Green Energy (YGE). In light of the equity's retreat, put players pounced on SOLR, with single-session volume skyrocketing to almost 10 times the norm. More specifically, SOLR saw close to 1,000 puts cross the tape yesterday, compared to its average daily volume of roughly 100 contracts.

The deep-in-the-money March 12.50 put saw 600 contracts change hands � most of which traded at the ask price, implying they were likely bought. Plus, put open interest at the front-month strike increased by exactly 600 contracts overnight, confirming our suspicions of fresh pessimistic positions. What's more, the March 12.50 strike remains most popular today, with almost 1,200 contracts exchanged so far.

The recent affinity for SOLR puts is further echoed by the latest data from the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past two weeks, the stock has racked up a put/call volume ratio of 0.50, in the 85th annual percentile. In other words, traders on the ISE and CBOE have initiated bearish bets at a faster pace only 15% of the time during the past year.

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Call Players Predict Extended Rebound for Sohu.com Inc. (SOHU)

Andrea Kramer (akramer@sir-inc.com)

3/9/2010 11:28:40 AM

Near-term call buyers swarmed Sohu.com Inc. (SOHU) on Monday, with single-session volume more than quadrupling the norm. More specifically, the Chinese Internet issue saw roughly 5,100 calls change hands, compared to its expected daily volume of fewer than 1,200 contracts.

Nearly all of the action centered on the stock's near-the-money March 55 strike, which saw almost 4,500 contracts cross the tape. The majority of the calls traded at the ask price, and call open interest at the front-month strike more than tripled overnight, hinting at buy-to-open activity. In fact, the 55 strike is now home to peak call open interest in the March series, with more than 5,800 contracts in residence.

By purchasing the March 55 calls, the buyers are betting the shares of SOHU will muscle past the $55 level by options expiration on Friday, March 19. At last check, the equity has added 1.7% to explore the $54.40 vicinity.

From a longer-term perspective, since grazing the $48 region in mid-February, the shares of SOHU have powered more than seven points higher, outpacing the broader S&P 500 Index (SPX) by 2% during the past 20 sessions. What's more, the stock is now poised to close the week atop its 20-week moving average for the first time since October 2009.

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Commentary by WhatsTrading.com

Unusual Activity Roundup, Mar 9

3/9/2010 4:00:01 PM

Some less actively traded names seeing bullish order flow: Exact Sciences (EXAS), Beazer Homes (BZH), BJs Wholesale (BJ) Bearish order flow: Maiden Holding (MHLD), PDL Biopharma (PDLI), Potlatch Holding (PCH) Post Earnings: Kroger (KR), Force Protection (FRPT) Pre-Earnings: Navistar (NAV) , J Crew (JCG) Ex-div.: Allstate (ALL), Wal-mart (WMT), Smith International (SII), ADP

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Citigroup Inc (C) $3.81 +7.02%

3/9/2010 1:20:01 PM

Citi (C) calls are seeing heavy trading as shares gain 22 cents to $3.78, session highs and their best levels of 2010. 165.6K April 4 calls traded (37% Mid / 52% Ask), 138.5K Mar 4 calls (78% Ask), and 54.8K Jun 4 calls traded (27% Mid / 55% Ask). An impressive 581K Citi calls traded so far and trading is still brisk. Implied volatility is down about 2.5 percent to 49. The bullish flow comes amid mixed action in the financials Monday, but seems to reflect some optimism that the worst might be over for Citi shareholders.

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AirTran Holdings Inc (AAI) $5.22 +5.24%

3/9/2010 12:20:00 PM

Airtran (AAI) is up 29 cents to $5.25 amid relative strength in the airline sector Tuesday. Reuters reports that demand for air travel among business customers is picking up. According to UAL CFO Kathryn Mikells, "We're clearing seeing signs of economic recovery and premium and corporate travelers returning." The Arca Airline Index (.XAL) is up 2.4 percent with help from the 5.8 percent gain in AAI. Meanwhile, AAI call options are seeing action, with 2130 traded, or about 7X the normal for the first two hours of trading. Mar, April, and Oct $5 calls are seeing the bulk of the flow.

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Cisco Systems Inc (CSCO) $26.20 +0.27%

3/9/2010 11:00:03 AM

Cisco Systems (CSCO) calls are seeing active trading ahead of the company's 8:00 a.m. PT web cast. The networking company is expected to make a major product announcement, which might be new technology for wireless carriers. Shares are up 3 cents to $26.16 and 64K calls traded (28K puts). The total volume represents 7X the typical activity for the first hour of trading. March 26, March 27, and April 27 calls are the most actives. Implied volatility is up about 3.5 percent to 26, as players jockey for position ahead of the news.

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Daily Rundown, March 9

3/9/2010 10:20:03 AM

Stocks are indicated lower on weakness overseas and falling commodities prices Tuesday. Less than thirty minutes before the opening bell, stock index futures indicate that the Dow Jones Industrial Average might lose about 20 points at the open.\n
\nTrading was cautious overseas before the opening bell on Wall Street. While Asias equity markets finished mixed, benchmarks are broadly lower across Europe. UKs FTSE is down .7 percent, Frances CAC 40 lost .6 percent, and Germanys DAX slipped .6 percent.\n
\nWeakness in Europe comes as Greeces Prime Minister George Papandreou travels to Washington to meet with President Obama Tuesday. In a speech to the Brookings Institute Monday, Papandreou said his country has not requested a bailout, but hopes European support will ensure his debt ridden country can borrow from global financial markets.\n
\nMeanwhile, the euro is taking a hit, falling .0085 to 1.3546 against the buck. The dollar fell .52 to 89.76 against the Japanese yen.\n
\nWith no economic data to guide the market action, bonds are bid on the spreading problems in Europe and after China reiterated its commitment to buying Treasurys. The benchmark ten-year note is up 8/32nd and now yields 3.68 percent.\n
\nHowever, euro weakness is weighing on commodities. Crude oil lost $1.37 to $80.50 a barrel and gold fell $11.50 to $1112.50 an ounce.\n
\nAmong the stocks to watch Tuesday, Cisco (CSCO) moves into the spotlight at 11:00 eastern time. The networking company is expected to announce a new product that will forever change the internet, which is possibly a technology for wireless carriers.\n
\nTexas Instruments (TXN) is down 1.4 percent after the company offered in-line guidance in its mid-quarter update after the closing bell yesterday. TIVO slipped 1.5 percent, even after the company posted earnings and revenues that easily topped analyst estimates late Monday. H&R Block (HRB) is also lower on earnings. Navistar (NAV) and Collective Brands (PSS) might see some pre-earnings action ahead of earnings, due out after the closing bell. \n

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Unusual Activity Roundup, Mar 8

3/8/2010 4:19:35 PM

Some less actively traded names seeing bullish order flow: Iridum Comm (IRDM), General Growth Properties (GGP), Logitech (LOGI) Bearish order flow: Pinnacle Entertainment (PNK), Rehabcare Group (RHB), Wonder Auto (WATG) Post Earnings: Poniard Pharmaceuticals (PARD), Yingli Energy (YGE) Pre-Earnings: Kroger (KR), E-House Financial (EJ), H&R Block (HRB) Ex-div.: Home Depot (HD), CBS, Brinker (EAT), Allegheny Tech (ATI), Expedia (EXPE)

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Palm Inc (PALM) $5.74 +0.53%

3/8/2010 1:59:39 PM

PALM, which hit a new 52-week low of $5.4 this morning, has seen a 17 cent spike in the past few minutes and is now up a nickel to $5.76. Option volume is still on the light side, with 18K calls and 12K puts traded. Implied volatility in PALM has been moving higher for the past few weeks and is up another 2.5 percent to multi-week highs around 93.

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Research In Motion Ltd (RIMM) $72.90 +4.89%

3/8/2010 12:19:39 PM

Resarch in Motion (RIMM) is up $3.28 to $72.78, the best gainer in the NASDAQ 100, and heading to session highs in active trading. Shares opened higher after BMO raised the stock to Outperform from Market perform and upped the price target to $80 from $75. The stock has been able to build on the early momentum and, in the options, 57000 calls now traded, or about 4X the typical activity for the first 90 minutes of trading. March 70 and 75 calls are the most actives, with 19.4K and 17.4K traded, respectively. Implied volatility is moving as well, up about 8 percent to 37.

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Visa Inc (V) $90.48 +2.23%

3/8/2010 11:19:39 AM

Visa (V) touched a new 52-week high and was recently up $1.74 to $90.25 amid strength in the credit card names (MA is up $6.76 to $246.30). In the options, Visa is active. 11,000 calls and 5640 puts traded so far. The top trades have been lots of March 85 puts at the ask. March 90 calls are the most actives. There is no news on V or MA today, but implied volatility is up 1.5 percent to 23.75, as it appears that premium buyers are taking positions in anticipation of increasing volatility in Visa over the next two weeks.

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Cell Therapeutics Inc (CTIC) $1.12 +25.09%

3/8/2010 9:59:41 AM

Cell Therapeutics (CTIC) is up 22 cents to $1.12 per share and calls are active in early trading after the FDA completed a review of a new overseas plant that manufactures pixantrone and found the site in compliance. Shares are up and early action includes a sweep of 4000 Sep 5 calls at a nickel. Looks like an opening lottery ticket buyer.

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More Options Commentaries and Observations by Schaeffer�s

Opening View: CBOE Single-Session Equity Put/Call Ratio Plunges to Multi-Year Low

The S&P 500 Index (SPX) edged above 1,140 on Tuesday, as the index took another cautious step toward challenging its 2010 highs and its 160-month moving average. The Dow Jones Industrial (DJIA), meanwhile, remains trapped below 10,600. Heading into the open, futures on the DJIA are trading about 22 points above fair value, while SPX futures are roughly flat with fair value. On the options front, the Chicago Board Options Exchange single-session equity-only put/call ratio came in at its lowest reading since Dec. 20, 2007, while the 21-day moving average of this ratio is at its lowest point since Feb. 8. Interestingly, the prior lows on both readings marked short-term bottoms for the DJIA and the SPX. For VIX watchers, the CBOE Market Volatility Index (VIX) remains trapped in a tight range, bound on the upside by the 18 level and its 10-day moving average, while support lies at the 17-17.50 area. A breach of support could send the VIX toward a fresh multi-year low.

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Market Recap: Stocks End Seesaw Session with Slim Gains

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Put Volume Accelerates on Chesapeake Energy Corporation

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Option Activity Alert: Morgan Stanley Could Be Stifled by Stiff Resistance

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