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May 7, 2013  Tue 12:20 PM CT

VNTV: SEE CHART GET CHAIN FIND STRATEGIES
Vantiv has the bears running for cover.

The payment-processing company reported first-quarter profit of $0.31 on revenue of $272.9 million yesterday. Earnings matched estimates, but the top line beat the $272.58 million expected by analysts.

The stock initially gapped lower because VNTV said one of its big investors would unload 38.6 million shares. But shares quickly recovered and are now up 4.76 percent to $24 in afternoon trading.

Option activity is extremely bullish as well, as large blocks of the June 25 calls changed hands for $0.55 and $0.60. More than 2,000 contracts traded with no previous open interest in the strike, according to our Heat Seeker market scanner. (See our Education section)

Short interest stood at more than 20 percent of the float in the middle of last month, so it appears that bears are getting squeezed out of the name. VNTV, which went public in March 2012, has also been making higher lows above its 200-day moving average for the last two months. This suggests that a bullish trend is taking hold.

The company normally trades just option 25 contracts in a session, but Heat Seeker shows today's volume at more than 100 times that amount.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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