The bulls are turning to hogs in Reynolds American.
optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 11,000 August 57.50 calls for $2.40 and $2.45, while 6,000 May 50 calls were sold for $7.20. Volume was below open interest in the shorter-dated contracts, which indicates that an existing position was closed and rolled forward in time.
But in addition to simply gaining an additional three months of upside exposure, he or she doubled the number of long calls . That will result in considerably more leverage if the tobacco stock continues to rally. The trader also recovered $1.65 million of capital. (See our Education section)
RAI is down 0.95 percent to $57.05 in afternoon trading and is up 14 percent so far this year. Most of that move followed a news report that the company may purchase rival Lorillard. The company has also been growing revenue with its Vuse electronic cigarettes and Grizzly snuff.
Our InsideOption Pro subscribers enjoyed the rally as well because we sent an alert on the May 50 calls when they first traded for $1.25 and $1.30 back on Feb. 20. Today's price represented profit of about 450 percent.
Total option volume is 9 times greater than average in the session, according to the Heat Seeker, with calls outnumbering puts by a bullish 23-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.
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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.