AGCO makes agricultural machinery, and traders are harvesting profits in the name.
optionMONSTER's Heat Seeker tracking system lit up early yesterday with buying in the December 45 calls for $0.30. The stock pushed higher as the day progressed, and those contracts soon doubled to $0.65.
The trade worked because long calls lock in the price where the stock can be purchased, and their cheap price helps investors manage risk while ensuring that they won't miss a rally. They can also generate huge leverage on a percentage basis, as we saw yesterday. (See our Education section)
AGCO ended the session up 4.01 percent to $43.85 but is down 26 percent so far this year. The stock has spent the last two months trying to bounce from its lowest level in more than two years.
Almost 13,000 AGCO contracts changed hands overall in the December 45s, dwarfing previous open interest of 1,353. Overall option volume in the name was 27 times greater than average, with calls accounting for a bullish 92 percent of the total.
(A version of this post appeared on InsideOptions Pro yesterday.)
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.