Without any news today, shares of data storage devices name
EMC Corp. (NYSE: EMC )
are relatively unchanged at $19.65 so far during afternoon trading.
The stock is trading around its 52-week high of $20, and at least
one investor bet that significant upside is yet to come by buying
At 1:09 p.m. EST, a block of 8,860 out-of-the-money (
) January 2012 22.5 calls changed hands for $1.80 per contract
versus current open interest of just 1,700 contracts. This volume
and open interest discrepancy indicates the investor most likely
initiated these calls to open on a bet that EMC shares could climb
higher than the breakeven price of $24.30 prior to January 2012
options expiration. Another reason we are quite certain that this
is a buyer is because the options are actually higher by more than
10 cents on the day. The shares only rallied five cents, which
demonstrates it was not just the stock price inflating the price of
the calls. Implied volatility has risen as well; implied volatility
of these 22.5 strike calls is now roughly 26%, compared to a
realized volatility of just 23% for the last six months.
EMC has not breached the $22 mark since December 2007, but the
call-buying action we saw today suggests at least one investor
expects significant upside throughout the next two-year period.
Keep in mind, however, if the options climb in the next few months
prior to January 2012 options expiration, this investor could
choose to sell back the calls and take profits if the calls
appreciate (which does not necessarily occur only with a rise in
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