Top 3 Stocks With Unusual Call Activities On Tuesday

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 |  Includes: AA, AEGR, MT
by: Nick Chiu

The rally continued on Tuesday as the optimism for the fiscal cliff deal continued. NASDAQ led the gain with 1.46% increase, followed by S&P 500's 1.15% gain. Dow Jones also rallied with 0.87% gain. QQQ closed at $66.55, which was well above its 50-day MA of $65.37 and 200-day MA of $65.42. SPY closed at $145.37, and DIA closed at $133.55, both were above their 50-day MA. All sectors were up on Tuesday with consumer cyclical sector led the gain with 2.01% increase and consumer non-cyclical lagged the gain with 0.53% gain.

For NYSE, 2,276 stocks advanced, 816 declined, and 78 stayed neutral. For NASDAQ, 1,795 stocks advanced, 701 declined, and 104 stayed unchanged. Top 3 stocks with unusual call activities on Tuesday had been identified and will be presented for investors to research further. The following 3 stocks have the daily call volume ratio above 4.00 (4x of the average call volume) with a call volume above 10,000.

Name (Ticker)

Call Volume

Average Call Volume

Daily Volume Ratio

Aegerion Pharmaceuticals, Inc. (NASDAQ:AEGR)

11,425

1,256

9.10

ArcelorMittal SA (NYSE:MT)

64,864

7,959

8.15

Alcoa Inc. (NYSE:AA)

43,375

9,964

4.35

Click to enlarge

Source: Schaeffer's Research

Aegerion Pharmaceuticals, Inc.

AEGR is a biopharmaceutical company, in a development stage, focused on the development and commercialization of novel therapeutics to treat severe lipid disorders.

AEGR closed at $23.30 with 3.83% gain on Tuesday. The volume of 729.5k was 2.09x of the 30 day average volume of 348.9k. AEGR was trading near its 52-week high of $23.50. The MACD (12, 26, 9) indicator started to show a bullish sign on Dec. 17 and the MAC difference diverged yesterday. The momentum indicator, RSI (14), was increasing to 64.34, indicating an increasing buying momentum. AEGR is currently trading above its 50-day MA of $20.26 and 200-day MA of $15.87, as seen from the chart below.

Click to enlarge
(Click to enlarge)

Source: StockCharts.com

The most active call was Dec. 21, 2012 at the strike price of $20.00 with a volume of 3,010 and an open interest of 3,440. The second most active call was Jan. 18, 2013 call at the strike price of $25.00 with a volume of 2,429 and an open interest of 1,666. The implied volatility is 90.2, and the chance of breakeven is 25.54. The historical volatility for AEGR is 48.00 for 1 month, 60.96 for 3 months, and 53.35 for 1 year. For bullish investors, a credit put spread can be considered to reduce the impact of implied volatility increase.

ArcelorMittal SA

MT, a Luxembourg-based company, is the world's largest steel producer, with an established presence in all major steel markets and steelmaking operations in 20 countries. The Company became the largest steel producer in 2006 after the merger of Mittal Steel and Arcelor, with about 8% of the world's steelmaking capacity.

On Dec. 17, as reported by Meshpress,

"The U.S. Court of Appeals for the Federal Circuit ruled that a new trial is required in the patent infringement lawsuit brought by ArcelorMittal against AK Steel (NYSE:AKS) and Severstal. The appeals court determined that the lower court's claim construction error prevented the jury from properly considering ArcelorMittal's evidence. The patent at the center of the suit covers boron steel sheet with an aluminum-based coating applied after rolling the sheet to its final thickness, according to a court filing. The process is used in the manufacture of automobile parts."

MT closed at $17.47 with 2.52% increase on Tuesday. MT had a nice rally from $14.61 on Nov. 20 with 19.58% gain at yesterday's closing. The MACD (12, 26, 9) indicator had been showing a bullish sign since Nov. 29 and the MACD difference continued to diverge. The momentum indicator, RSI (14), is showing a strong buying momentum at 74.47, which is also in the over-bought territory. MT is trading well above its 50-day MA of $15.37 and 200-day MA of $15.65, as seen from the chart below. MT is extremely bullish in the short-term, technically.

Click to enlarge
(Click to enlarge)

Source: StockCharts.com

The most active call was Dec. 21, 2012 call at the strike price of $16.00 with a volume of 28,416 and an open interest of 23,520. The implied volatility is 48.5, and the chance of breakeven is 48.54. The historical volatility for MT is 25.04 for 1 month, 32.5 for 3 months, and 43.66 for 1 year. For bullish investors, a credit put spread can allow investors to gain some upside potentials while having the plan to acquire the stock at a discount price as MT is currently in the overbought territory.

Alcoa Inc.

AA engages in the production and management of primary aluminum, fabricated aluminum, and alumina combined, through its participation in technology, mining, refining, smelting, fabricating, and recycling. AA is the largest player in the global aluminum market, producing 20% of the world's alumina and 10% of its aluminum.

On Dec. 18, 2012, Saudi Arabian Mining Co., the Saudi Arabian company that's building an alumina refinery in a joint venture with AA, obtained $2.4 billion in loans to finance projects, raising more money than initially sought, as reported from Bloomberg. Later on the same date, as reported by MarketWatch, AA shares are likely to face pressure on Wednesday after Moody's placed its Baa3 rating on review for downgrade late Tuesday. As stated in Moody's statement,

"The review reflects the challenging headwinds facing Alcoa given the decline in aluminum prices that has occurred, on a sequential quarterly basis, through Sept. 30, 2012 (dropping almost 22% to an average of roughly 92 cents/lb from the comparable 2011 average) and the adverse impact this has had on Alcoa's earnings performance and earnings-based debt protection metrics in particular."

AA closed at $8.91 with 1.83% gain on Tuesday. AA had been trading in the range of $7.97-$10.92 in the past 52 weeks. AA has a high beta of 2.04. The MACD (12, 26, 9) indicator had been showing a bullish sign since Nov. 26 and the MACD difference continued to diverge. RSI (14) is showing an increasing buying momentum at 66.57. AA was approaching its 200-day MA of $8.9 and managed to close above it on Tuesday, as seen from the chart below. AA is very bullish in the short-term, technically.

Click to enlarge
(Click to enlarge)

Source: StockCharts.com

The most active call for AA was Jan. 18, 2013 call at the strike price of $9.00 with a volume of 83,697 and an open interest of 127,552. The implied volatility is 26.3, and the chance of breakeven is 30.89. The historical volatility for AA is 14.17 for 1 month, 22.95 for 3 months, and 27.84 for 1 year. Investors should wait for a clear indication to see if AA can break above its 200-day MA to setup the long positions.

Note: All numbers/prices are quoted from the closing of December 18, 2012 with the data provided from Barron's, MorningStar, Schaeffer's Investment Research, Inc., Google Finance, and Yahoo! Finance. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.