Options Trading News

May 6, 2014  Tue 5:16 AM CT

Hilton Worldwide saw call buying that turned a quick profit last week, and the bulls are coming back for more ahead of earnings results Friday morning.

Nearly 4,000 May 22 calls were purchased for $0.54 to $0.75 yesterday, according to optionMONSTER's Heat Seeker tracking system. The volume was well above the strike's previous open interest of 926 contracts, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased through the end of next week no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares drop. (See our Education section)

The bullish trades followed call buying in the May 21 strike last Monday. Those contracts doubled in value by the end of the week even though the stock rose only 3.7 percent in that time, illustrating the leveraging potential of options.

HLT was up 0.5 percent yesterday to close at $22.16, just above its 50-day moving average. The hotel operator went public in December for $20 and has been range-bound mostly between $21 and $23 since then.

Total option volume in Hilton reached 6,175 yesterday, more than 5 times its daily average for the last month. Only 162 of those contracts were puts, a reflection of the session's bullish sentiment.

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