One big investor likes Reynolds American for the long haul.
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 3,000 January 2015 50 calls in the cigarette maker, most of which price for $3.60. Volume surpassed open interest at each strike, indicating that new positions were initiated.
These long calls give the trader the right to buy RAI shares for $50 in the next 15 months no matter how high they might climb. The options could also be sold earlier at a profit if premiums rise with a rally in the interim, but they could also expire worthless if the stock drops significantly. (See our Education section)
RAI rose 0.64 percent to $50.60 on Friday and has been trending steadily higher since 2009. It hit resistance around the $50 level in May, pushed above it in July, and is now trying to break through once again. The lows were incrementally higher during that time, which could make some chart watchers think that the bullish uptrend remains in place.
Total option volume was 10 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by a bullish 14-to-1 ratio.
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