Options Trading News

March 14, 2013  Thu 3:16 AM CT

BJ's Restaurants typically sees very little option activity, but yesterday it attracted some unusual call buying.

More than 1,100 April 35 calls traded in a strong buying pattern as premiums rose from $0.15 to $0.25, according to optionMONSTER's Heat Seeker system. The volume was well above the strike's open interest of 346 contracts, indicating that these are new positions.

BJRI rose 1.27 percent yesterday to close at $31.91, back near its 50-day moving average. The stock gapped down from above $33 after its fourth-quarter report on Feb. 20 but has been climbing steadily in the last week. The casual-dining sector is up 28 percent in the last year but has slowed in the last month, according to our researchLAB analysis tool.

Yesterday's long calls, which lock in the price where traders can buy shares, are betting that BJRI will gain roughly 10 percent or more by mid-April. These contracts could be sold earlier at a profit with any rally before then, but they will expire worthless if the stock remains below the $35 strike price. (See our Education section)

The call buying made up almost all of yesterday's option volume in the name, which was 9 times its daily average in the last month. Only 16 puts changed hands in the session, a reflection of the 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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