Bulls look for payday from Paychex


Shutterstock photo

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 Education 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 total.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com