Calls bet will keep ripping

By David Russell,

Shutterstock photo

Chinese e-commerce company has been ripping, and the bulls are looking for more.

optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 2,900 August 55 calls for $3.90 and the sale of 2,250 July 45 calls for $7.20. Volume was below open interest in the 45s, which suggests that an existing long position was closed and rolled forward in time.

Long calls lock in the price where investors can buy a stock, which lets them profit from a rally with limited cost. Capital can be swapped from one contract to another as shares advance, which lets traders take money off the table while staying in the trade. (See our Education section)

WUBA rose 5.13 percent to $54.90 on Friday and has more than tripled since its initial public offering in October. The company gapped higher on a strong quarterly report in late February and followed with more positive numbers in May. Guidance was greater than consensus on both occasions as well.

The company is based in Beijing and focuses on connecting local merchants with customers. Its stock ticker "WUBA" is an approximate rendering of the number 58 in Chinese.

Overall option volume was 16 times greater than average in the session, according to the Heat Seeker. Calls accounted for a bullish 93 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
Referenced Stocks: WUBA

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