Schaeffer's Options Center

After spending the last several days pinned between beneath the $9.50 level, MGM Resorts International (MGM) today vaulted higher, jumping past short-term resistance at its 10-day and 20-day moving averages, to its current perch at $9.95. In fact, MGM has not closed a session above this duo since Aug. 9.

However, traders seem somewhat skeptical of MGM's technical feat, with nearly 9,300 puts crossing the tape so far today -- well above the casino concern's expected single-session put volume of fewer than 7,000 contracts.

Put activity has accelerated on MGM lately, with the International Securities Exchange (ISE) reporting that 0.98 puts have been bought to open for every call, a ratio which ranks above 79% of all readings taken during the past year. In other words, traders on the ISE have been scooping up MGM puts at a faster pace than usual lately.

The September 10 put has attracted the most attention today, with 4,737 contracts changing hands -- the bulk of which traded at the ask price, implying they were purchased. If these puts were, in fact, bought to open, then it would seem that traders are counting on MGM to remain beneath the $10 level over the next few weeks.

Despite MGM's surge past short-term resistance today, the shares still remain pinned beneath their 10-week moving average, which is located just above the $10 level. In light of this, today's put players may be counting on continued pressure from this trendline.

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First Solar, Inc. (FSLR) has been a favorite target of put buyers lately, despite the stock advancing roughly 10% during the past two weeks. More specifically, the solar concern sports an International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE) 10-day put/call volume ratio of 1.34, which ranks in the 79th annual percentile. In other words, during the past couple of weeks, speculators on the ISE and CBOE have bought to open FSLR puts over calls at a much faster clip than usual.

Echoing that trend, FSLR has already seen roughly 9,600 puts cross the tape today – about twice the number of FSLR calls traded, and more than three times the security's expected single-session put volume.

Garnering the bulk of the attention has been the deep-out-of-the-money October 110 put, which has seen around 6,000 contracts traded on open interest of fewer than 2,400, indicating that a healthy portion of the action should translate into fresh open interest. What's more, over half of the back-month puts have crossed closer to the ask price, pointing to a slew of freshly purchased bearish bets. By buying the October 110 puts to open, the traders are betting the shares of FSLR will retreat south of the $110 level before October-dated options expire.

Technically speaking, FSLR has been a broad-market standout lately, outpacing the S&P 500 Index (SPX) by 23% during the past 60 sessions. Furthermore, the equity is now poised to finish the week atop its 60-week moving average for only the fourth time since late October. At last check, the stock has added 1.5% to flirt with the $136.90 level.

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Potash Corp. of Saskatchewan (POT) is once again the center of buyout buzz today. Citing sources familiar with the matter, the Wall Street Journal reported that Beijing officials have ordered state-owned companies – including Sinochem – to meet with advisers about blocking BHP Billiton's (BHP) $39 billion bid for the potash concern. According to Reuters, China – which buys about 7% of Potash Corp.'s output – is concerned that a BHP takeover could weigh on supplies required to feed the nation's still-growing population.

The news has triggered a flood of options activity on POT – especially on the call side of the aisle. Around midday, the security has already seen about 9,000 calls change hands – almost twice the number of POT puts exchanged.

Garnering the most attention have been the out-of-the-money September 155 and 160 strikes, which have seen roughly 2,800 and 2,300 calls traded, respectively. Meanwhile, about 2,200 October 160 calls have crossed the tape, while the September 150 strike has seen close to 1,500 calls exchanged so far today.

More specifically, most of the September 155 and 160 calls traded in several blocks marked "spread." This – combined with the affinity for short-term, out-of-the-money calls – could indicate that speculators are betting on China to trump BHP's $130-per-share offer for POT (which Potash Corp. called "grossly inadequate"), but want to hedge their bets in case their forecasts don't come to fruition.

At last check, the shares of POT have bucked the broad-market trend higher, giving up 0.3% to explore the $148.10 area.

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U.S. stocks climbed on Thursday, boosted in part by an unexpected jump in pending home sales. Blue-chip bigwig Alcoa Inc. (AA) led the pack, advancing some 3% on the day. The shares are now sitting around $10.86, set to close the week above their 10-week moving average for the first time since Aug. 6.

Unsurprisingly, option activity surged on AA on Thursday, with 37,000 contracts changing hands -- 1.5 times the stock's expected single-session volume of around 24,000 contracts. Calls had the edge, with roughly 26,000 of these bullish bets traded.

Traders liked the October 11 call, with 10,187 contracts traded -- 80% of which crossed the tape at the ask price, indicating they were likely purchased. Open interest ballooned by nearly 7,800 contracts overnight, confirming that fresh bullish positions were added at this strike. By buying to open the October 11 call, option players are counting on AA to surmount the $11 level over the next two months.

Option players are generally bullish on AA, as evidenced by the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.47, which ranks in the 25th annual percentile. In other words, short-term traders have been more bullishly aligned toward the Dow component only one-quarter of the time during the past 12 months.

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It's hard to believe, but the NFL's regular season kicks off in just days. However, football fans aren't the only ones cheering the upcoming season, so is the NFL's "official pizza sponsor," Papa John's Int'l, Inc. (PZZA). The pizza king is planning on special promotions and deals for fans throughout the season, a season-long partnership with NBC Sports' "Football Night in America," numerous customized sponsorship elements with NFL Network, and sponsorship of "NFL Primetime" on ESPN and "Fantasy Football Now" on ESPN2.

According to Andrew Varga, PZZA's chief marketing officer, "Our sponsorship of the NFL is a strategic play that gives the Papa John's brand a powerful affiliation with the NFL and co-branding elements that elevate our brand on NFL game days across the season."

Meanwhile, option players have all but ignored PZZA lately, as evidenced by the configuration of its September series of options. The September 25 strike houses peak call open interest of just 13 contracts, while the September 22.50 strike claims the title of peak put open interest, with a whopping 25 contracts in residence. In fact, for the past few weeks, PZZA has been hovering around the $24 level -- right in the middle of this configuration.

Should PZZA indeed increase its profile through its NFL sponsorship, perhaps the pizza company could attract a bit more attention from option players as well.

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And the winner is... Hewlett-Packard Company (HPQ)! This morning the bidding war for 3PAR Inc. (PAR) was ended after Dell Inc. (DELL) said that it would not counter HPQ's latest offer. This ends three weeks of a heated back-and-forth war between HPQ and DELL. HPQ's latest offer values PAR -- a small data-storage company -- at roughly $2.4 billion, or $33 per share.

PAR has attracted quite a bit of attention today, with 119,000 contracts changing hands so far -- eight times PAR's expected single-session volume of just 14,000 contracts.

The October 35 call has had over 11,400 contracts traded -- the bulk of which changed hands at the bid price, indicating they were likely sold. With today's volume far exceeding open interest at this strike, it seems the bulk of these calls are, in fact, fresh positions. By selling to open the October 35 call, traders are counting on PAR to remain beneath the $35 level for the next two months.

PAR jumped to an annual high of $33.84 after today's news, and is currently hovering around $32.84 -- which, given the company's buyout price of $33, is probably right where the stock will remain.

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