Call volume continues to dominate the oil issue's options pits, despite weak price action
by Elizabeth Harrow 3/12/2009 1:45 PM
Whose investing prowess do you trust more: highly esteemed billionaire Warren Buffett, or CNBC's resident sideshow, Jim Cramer? In the interest of journalistic integrity, I'll refrain from stating my preference (although my descriptions probably leave little to the imagination). When it comes to option players though, these speculative investors are clearly siding with Cramer over Buffett -- at least where ConocoPhillips ( COP: 
sentiment, chart, options) is concerned.
Let me explain. In a letter to investors, Buffett recently confessed to doing some "dumb things" in 2008. Chief among those was an investment in COP at the height of the oil bubble, which he referred to as a "major mistake."
On the other side of the coin is Cramer. In flipping past CNBC last night, I caught the Mad Money maven touting COP as one of his favorite picks. In fact, he recently suggested ConocoPhillips as a potential candidate for inclusion in the Dow Jones Industrial Average (though he did admit that current oil prices don't necessarily warrant 3 major oil firms in the blue-chip barometer).
Judging by recent option activity, speculative investors are placing more weight on Cramer's opinion than Buffett's. During the past 10 days, traders on the International Securities Exchange (ISE) have bought to open 34,273 calls on COP, compared to just 6,403 puts. The equity's 10-day call/put ratio of 5.35 reveals that bullish bets have been more than 5 times as popular as their bearish counterparts.
In fact, the stock's current ISE 10-day call/put ratio ranks higher than 97.2% of other such readings taken during the past year, suggesting that traders on this exchange have rarely been more optimistically biased toward the shares of ConocoPhillips.
In the front-month series, bullish bettors are heavily focused on out-of-the-money calls. COP's March 40 call has 18,129 contracts in residence; the March 45 strike has 11,685 open call positions; and the March 50 call boasts open interest of 15,873 contracts. Out in the April series, the 40 strike is attracting the bulk of the attention, with open interest of 22,198 call contracts.
It seems unlikely that these upbeat option traders are hedging short positions, either. Short interest on COP is extremely light, amounting to just 0.9 times the equity's average daily volume. Unfortunately, the security's less-than-stellar price action leaves little hope for bullish investors.
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