One big investor expects a strong earnings from Paychex after
the bell today.
optionMONSTER's Heat Seeker tracking program detected the purchase
of about 2,500 October 35 calls against open interest of 1,467
contracts. Most of the volume priced for $0.35 and $0.40.
The investor now has the right to buy shares in the human-resources
company for $35 over the next four weeks. If they rally, he or she
stands to earn leveraged gains from the move, but the contracts
will expire worthless if the stock remains little changed.
PAYX is down 0.58 percent to $34.34 in afternoon trading before the
release of fiscal first-quarter results after the close. The
company's earnings have mostly beaten expectations in recent
quarters, although revenue has generally missed consensus.
Shares have risen nonetheless, and are now hovering around their
highest levels since September 2008. Traders often buy calls rather
than stocks under such circumstances because they will profit from
a breakout while limiting the potential loss if the stock goes in
the wrong direction. (See our
section for other ways to manage risk.
Overall option volume in PAYX is 5 times greater than average so
far today, with calls accounting for more than 80 percent of the
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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