Options Trading News

October 23, 2013  Wed 12:20 PM CT

One big investor has made a killing in Norfolk Southern and apparently thinks that the railroad will keep on rolling.

Barely a month ago, optionMONSTER's Heat Seeker monitoring system detected buying in the January 82.50 calls for $1.25. At the time, NSC had never traded over $81, so traders were positioning for a breakout to new highs.

They got it today after earnings and revenue beat expectations, with good numbers that resulted from strong shipments and lower expenses. NSC is up 5.27 percent to $84.85 in afternoon trading.

Now the Heat Seeker is flashing bullishly once again. This time, traders sold about 5,000 of those January 82.50 calls for $3.10 and bought 2,500 January 87.50 calls for $1.15. He or she collected $1.26 million in the process and remain exposed to further gains if the stock keeps making new highs.

Management said growth in the chemical, metals, construction, automotive, and intermodal segments offset weak coal traffic. Its operating ratio--costs divided by revenue--declined 3 full percentage points.

Railroads are one of the strongest groups today, according to our researchLAB market-analysis tool. That's keeping transports positive despite losses in the broader market.

Overall option volume in NSC is 8 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by more than 4 to 1.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »