Options Trading News

July 25, 2013  Thu 4:45 AM CT

Masco saw a rush of last-minute call buying yesterday before its earnings report next week.

optionMONSTER's Heat Seeker system found heavy buying in more than 6,700 August 22 calls that traded late yesterday, most of them in the final hour of the session, led by prints of 1,146 and 1,757 that went for $0.40 and $0.45 respectively. Volume was more than double the strike's previous open interest, indicating that these are new positions.

These long calls lock in a $22 purchase price for the stock no matter how far it might rise. But they will expire worthless if shares remain below that level through August expiration three weeks from tomorrow. (See our Education section)

The company, which manufactures products ranging from cabinets to faucets, is scheduled to announce second-quarter results on Tuesday before the market opens.

MAS fell 2.6 percent yesterday to close at $20.57, right at its 50-day moving average. The stock had fallen sharply after hitting a five-year high of $22.83 on May 22, but it bounced at the $19 level a month later and has been trending higher since.

Our scanners found bullish call buying several times in June, mostly recently in the October 21 strike about a month ago. Those calls, which were purchased for $0.85 to $1.20 at that time, are now going for $1.55 to $1.60.

Total option volume in MAS topped 9,900 yesterday, compared to a daily average of 1,120 contracts for the last month. Calls outnumbered puts by 8 to 1, a reflection of the session's bullish sentiment.
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