Options Trading News

January 22, 2014  Wed 5:16 AM CT

CIT Group releases earnings next week, and the bulls piled in yesterday.

optionMONSTER's Heat Seeker system detected heavy buying in the February 52.50 calls. The largest block of 4,500 contracts went for $0.42, accounting for more than half the 8,250 that were purchased. Volume was 98 times previous open interest, so new money was clearly put to work.

These long calls lock in the price where shares can be purchased in the small-business lender. They provide cheap exposure to gains and can let investors generate significant leverage in a rally, but the contracts will expire worthless if shares remain below $52.50 through mid-February. (See our Education section)

CIT declined 0.52 percent to $49.64 yesterday, pulling back to its 100-day moving average for the first time in more than a month. Quarterly results come out on Jan. 28, and yesterday's call buyers will profit if the stock gaps higher on a strong report.

Total option volume was 13 times greater than average in the session, with calls outnumbering puts by a bullish 16-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)
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