Options Trading News

July 25, 2014  Fri 3:47 AM CT

American Realty Capital is drawing heavy call buying ahead of its earnings report early next week.

Two big prints of 6,524 August 13 calls were purchased for $0.22 and $0.23 yesterday, both above the ask price at the time, according to optionMONSTER's Heat Seeker tracking system. Open interest in the strike was 4,081 contracts before the trades appeared, so this is fresh buying.

These long calls lock in the price where the stock can be purchased through mid-August no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $13. (See our Education section)

ARCP slipped 1.12 percent to $12.85 yesterday. The stock had been trending lower since hitting at 52-week high of $14.96 in late February but found support around $12 in mid-June.

The real-estate company is scheduled to release second-quarter results on Tuesday before the market opens.

Total option volume in the name topped 20,300 contracts yesterday, quadruple its daily average for the last month. Overall calls outpaced puts by 4 to 1, a reflection of the session's bullish sentiment.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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