Traders snapped up calls in Coca-Cola Enterprises yesterday as shares rose sharply amid buyout speculation.
About 4,000 July 48 calls were bought for $0.65 to $1.20, according to optionMONSTER's Heat Seeker tracking program. This is fresh buying, as previous open interest in the strike was just 172 contracts.
These long calls lock in the price where the stock can be purchased for the next month no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts could quickly lose value if shares stall or pull back. (See our Education section)
CCE rose 3.46 percent to close at $47.53 yesterday, just off session highs. The beverage bottler reaffirmed its 2014 guidance on Wednesday and has been spiking higher with acquisition rumors. Shares bounced at the $44 level on Monday and are back near its all-time high of $48.05 reached at the end of March.
Total option volume in the name surpassed 12,800 yesterday, 6 times its daily average for the last month. Only 553 of those contracts were puts, an indication of the session's bullish bias.
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