Options Trading News

April 30, 2013  Tue 9:30 AM CT

Bulls chase as Meritor runs

Meritor popped on a strong earnings report today, and the bulls are giving chase.

optionMONSTER's Heat Seeker monitoring program detected the purchase of some 5,000 January 6 calls for $1.10 to $1.15. There was no open interest in the contracts before the trades appeared, indicating that new money is being put to work.

MTOR is up 20.84 percent to $5.74 in morning trading. The maker of automotive drivetrains reported second-quarter profit of $0.06, better than the $0.05 expected by analysts. Management also said revenue will improve in the second half.

The call buyers have now locked in the price where they can buy MTOR shares through early next year. That prevents them from missing a rally while requiring them to risk much less capital than would be the case in owning shares outright. It also has the potential to generate significant revenue if the stock keeps climbing. (See our Education section)

Total option volume is 23 times greater than average in the session, according to the Heat Seeker. Calls account for almost 90 percent of the total.
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