Airplane and helicopter maker Textron popped yesterday, and option traders are betting that it will keep gaining altitude.
optionMONSTER's Heat Seeker tracking program detected the purchase of about 5,800 January 26 calls in volume that was far above the previous open interest of 663 contracts, indicating that this is fresh buying. Premiums started at $0.24 and rose along with the stock price, fetching $0.28 near the close of the session.
These long calls lock in the price where investors can buy TXT shares and can generate significant leverage relative to the underlying equity. But if the stock doesn't move by expiration in about two weeks those contracts will lose all their value. (See our Education section)
TXT rose 2.78 percent to $25.48 yesterday. It's been grinding sideways for the last two years and remains well below its levels before the market crashed in 2008.
Overall option volume in the name was 15 times greater than average in the session, with calls accounting for a bullish 80 percent of the total.
(A version of this post appeared on InsideOptions Pro yesterday.)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
