Why the bulls are hungry for BRF
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 9,000 June 22.50 calls in volume far above previous open interest of just 226 contracts, clearly indicating new activity. Most of the large blocks priced for $1.60 to $1.70.
These long calls lock in the price where a stock can be bought, letting investors cheaply position for a move higher. They also have the potential to generate significant leverage if a rally ensues. For instance, a gain of just 20 percent in the stock price would roughly double their initial outlay. (See our Education section)
BRFS rose 3.41 percent to $21.86 yesterday but is down 16 percent in the last three months. The company's profit has climbed more than 200 percent in the last year and is expected to keep growing at a 51 percent clip in 2014 as new products drive results.
The stock also made a higher low this month compared with the level where it troughed in June, which could make some chart watchers think that it's in a bullish uptrend.
Total option volume was more than 200 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by a similar ratio.