Options Trading News

January 8, 2013  Tue 12:20 PM CT

The bulls are betting that there's no stopping Sherwin-Williams.

optionMONSTER's Heat Seeker tracking system detected the purchase of 3,500 March 170 calls today for $2.15 to $2.20. The volume was 10 times greater than the strike's open interest before the day's trading began, clearly indicating that this is a new position.

These long calls lock in the price where shares can be bought, and they can generate significant leverage if gains continue because they are much less expensive than the underlying stock. The options also carry much less risk than buying shares directly, but they will expire worthless if SHW doesn't rally. (See our Education section for more on how options can be used to manage risk.)

SHW is up 0.8 percent to $159.76 in afternoon trading, less than $2 below its all-time high of $161.74 established earlier in the month. The paint maker has appreciated by more than 70 percent in the last year with earnings driven by higher product prices.

Total option volume is 6 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by a bullish 14-to-1 ratio.
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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.

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