The FINANCIAL — Transports have been strong recently, and the bulls are looking for American Airlines to take off by early next year.
About 13,000 February 50 calls were purchased mostly for $2.25 to $2.30 yesterday, according to optionMONSTER’s Heat Seeker tracking program. Open interest in the strike was only 141 contracts before the session began, indicating that new money was put to work, according to Nasdaq.
Long calls lock in the price where investors can buy a stock, letting them profit from a rally while risking only a small amount of capital. The relatively cheap cost of the options can also generate significant leverage on a percentage basis if shares move higher.
AAL was up 0.51 percent yesterday to close at $42.96. The airline carrier’s shares fell sharply earlier this year but are at the top of a range that has been in place for more than two months as fuel costs continue to decline.
Total option volume in the name topped 54,700 yesterday, 70 percent higher than its daily average for the last month. Overall calls eclipsed puts by nearly 3 to 1.
Yesterday’s call buying was cited by optionMONSTER co-founder Jon “DRJ” Najarian on CNBC’s ” Halftime Report .”