The economy keeps adding jobs, and traders want another payday from Paychex.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 December 49 calls for $0.45 and the sale of 5,000 December 46s $1.95. Volume was below open interest at the lower strike, which indicates an existing long position was closed and rolled higher.
Long calls lock in the price where investors can buy shares in the payroll-services company, allowing them to play for a rally at limited cost. That helps manage risk because only the low cost of the options can be lost in the event of a drop. (See our Education section)
Today's transaction recovered $525,000 of capital, while doubling the number of upside contracts. Traders also more than doubled their gamma, which means their leverage will increase quickly if a rally ensues. He or she appears to be targeting a move into fiscal second-quarter earnings, which last year came out before December expiration.
PAYX is up 0.86 percent to $47.47 in afternoon trading. It surged on a strong earnings report Sept. 24, pulled back with the broader market in mid-October, and has been ripping higher since. The company has also benefited from a backdrop of improving employment in the United States.
Total option volume is quadruple the daily average, with calls outnumbering puts by more than 9 to 1.
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