The following is a snippet from Market Intellisearch regarding the recent action in the options market for Pan American Silver Corporation (PAAS) and its ramifications for the stock price.

NEW YORK (Market Intellisearch) — PAAS options saw interesting call activity today. A total of 241 put and 1,711 call contracts were traded raising a low Put/Call volume alert. Today’s traded Put/Call ratio is 0.14. There were 7.10 calls traded for each put contract.

A significant increase in the trading volume of a stock’s option often is a precursor of movement by the underlying stock. In such instances, Put/Call Ratio can be used as an investor sentiment indicator, where a high ratio implies that the overall investor sentiment is bearish and a low Put/Call ratio implies that the overall sentiment is bullish.

Posted on 04/07/2010 by Leo Goldman

As we can see from the above chart the stock price has moved higher since the 7th April 2010 and has increased 25% over the last 6 weeks or so.

The PUT/CALL ratio is another technical indicator than can give us a pointer to the possible future movement of the stock. Do remember that none of them are perfect but they can be helpful from time to time.

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