Options Trading News

May 1, 2013  Wed 5:16 AM CT

Some traders are betting that Paychex will make new highs later this year.

optionMONSTER's Heat Seeker program detected heavy buying in the December 37 calls, with more than 2,500 contracts purchased in volume that dwarfed the previous open interest of just 20 contracts. Premiums rose from $1.22 to $1.40, but most of the options priced in the middle of that range.

These long calls lock in the price where investors can buy shares in the payroll processor, which is parked at its highest level in almost five years. If it breaks resistance and continues to run, those options stand to generate significant leverage. And if it drops, traders will lose much less money than they would owning shares. (See our Education section for more on how options can be used to manage risk.)

PAYX ended the session at $36.41, up 0.78 percent. Its most recent earnings report beat expectations on the top and bottom lines, and the next one will probably be released in late June, based on last year's calendar.

Total option volume was 5 times greater than average in the session, with calls dominating the activity.

(A version of this post appeared on InsideOptions Pro yesterday.)
Share this article with your friends

Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »