Calls target historic level for UAL
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker monitoring program shows an investor going all the way out to the January 2015 expiration, the longest-dated contracts available in the name. He or she bought 10,000 calls at the 50 strike, most of which priced for $2.21. This is a new position, as there was no open interest before the trade appeared.
These long calls give the investor the right to buy UAL shares for $50 in the next 20 months, no matter how high they might be at the end of that period. The stock closed at $33.29 yesterday, up 1.12 percent, so those calls are still far out of the money.
The trader is essentially looking for shares to return to the level where UAL peaked in 2007, before the 2008 market crash sent it spiraling below $4 in the next two years. The shares have been working their way higher since.
The January 2015 contracts give investors the peace of mind knowing that they won't miss a move above $50. They might not have the capital to get long the name yet but expect more funds to be available in the future. (See our Education section for more on how options can be used to manage a wide range of portfolio objectives.)
More than 25,000 contracts changed hands in the session, almost quadruple the daily average. The Heat Seeker showed calls accounting for a bullish two-thirds of the total.