AOL Put Trades Perking Up Our Attention

Since CSCO is higher by 1 3/4 thus far, its not
surprising to see that there are so many calls trading. However, the straight
volume would imply a much more bullish picture, as the volume totals are 4:1,
while the dollar-weighted numbers are a more moderate 3:1. Both Microsoft
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PowerRating) and
Juniper
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have dollar-weighted call volumes that are closer to what we would expect
given the straight volume ratio.

On the bearish side, despite gains in JDS Uniphase
Corp.
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PowerRating) (trading up 5 5/16 to 46 9/16) and AOL (up 1.34
to 49.87) we are seeing some pretty active put accumulations. For instance,
the straight call vs. put volume in JDSU might indicate the bulls are still
in charge, but our dollar-weighted numbers show that the puts that are
trading, are of significantly greater value than the calls.

Likewise, the puts in AOL Time Warner, Inc.

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PowerRating) trail the call volume. The neophyte might see the 3:1 call lead and
not realize that the dollar-value picture is decidedly less bullish. In fact,
the 178,266 dollar-weighted puts to just 37,557 calls is downright bearish.
This could be because AOL has found the $50 level to be difficult to
pierce. The 200-day MA looms at just 51.67, so perhaps the institutional put
buyers are betting on a pullback to the $40 support level. The only thing
bullish that we see in AOL is that 65,000 FEB 60 puts were sold and or rolled
to just 4500 March 45 puts. The fact that they bought the 45s instead of
rolling to an in-the-money 60 put may mean they see less downside risk. I
guess that’s why we play the game.