Encouraging Analyst Note Motivates Motorola Call Players

Andrea Kramer (akramer@sir-inc.com)

Call traders have mobbed Motorola, Inc. (MOT) today, thanks to a few words of encouragement from Oppenheimer. More specifically, the analysts this morning recommended buying MOT shares before the mobile device manufacturer's spin-off of Motorola Mobility (Future ticker: MMI) next month. The brokerage firm opined that MOT's stock price doesn't reflect MMI's forecasted market cap of around $5 billion, pointing to an appealing entry point for a long MOT position. "We see an opportunity to unlock value with the January split," Oppenheimer said in a note.

In the wake of the bullish note, MOT has seen roughly 34,000 calls cross the tape so far today, more than doubling its expected daily call volume. Garnering the most attention has been the equity's now-in-the-money December 8 call, which has seen about 8,000 contracts change hands. However, the majority of the calls have traded at the bid price, suggesting that a slew of short-term speculators may be cashing in their proverbial chips by selling to close their winning positions.

From a broader sentiment standpoint, though, today's preference for MOT calls merely echoes the growing trend. The security has racked up a 10-day call/put volume ratio of 61.28 on the International Securities Exchange (ISE), implying that traders have bought to open more than 61 MOT calls for every put during the past couple of weeks. What's more, this ratio registers in the 99th annual percentile, indicating that options players on the ISE have initiated bullish bets over bearish at a faster clip just 1% of the time during the past year.

However, there could be an ulterior motive behind this escalating affinity for long calls. During the past month, short interest on MOT skyrocketed by almost 50%, and now accounts for 2.3% of the stock's total float. This simultaneous influx in both bought calls and short interest could indicate that the shorts are hedging their pessimistic positions with options.

In afternoon trading, MOT has tacked on 3% to loiter in the $8.60 region.

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