Financials are breaking out, and the bulls are piling into Goldman Sachs.
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 7,000 September 180 calls in the iconic Wall Street firm, most of them priced for $1.70 to $2.24. The volume was about twice the previous open interest at the strike, indicating that new positions were initiated.
Long calls lock in the level where investors can buy the stock, letting them position for a rally at limited cost. They can generate significant leverage if shares move in the right direction but will quickly lose value on a pullback. (See our Education section)
Today's activity was followed seconds later by December 24 call buying in the SPDR Financial Fund (XLF), which is back to its highest level since September 2008. The timing suggests that at least one major investor anticipates a rebound the sector following months of underperformance.
GS is up 1.58 percent to $178.23 in afternoon trading and has been trending higher since the late spring. It's up 12 percent in the last three months, twice the gain of the XLF the same time frame. Earnings and revenue have beaten estimates for the last three quarters.
Overall option volume in GS is almost quadruple the daily average, with calls outnumbering puts by a bullish 5-to-1 ratio.
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.