Call buyers flip switch in Generac
Generac spiked higher as Hurricane Joaquin gathered steam yesterday, and traders are betting the power-generator manufacturer will continue higher.
optionMONSTER's Heat Seeker shows that about 4,500 October 30 calls were purchased for $0.25 to $1.45 in the session. This is clearly fresh buying, as open interest in the strike was only 375 contracts before the day began.
These long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. But the contracts will quickly lose value if the stock stalls or pulls back. (See our Education section)
GNRC rose 10.46 percent to $30.09 yesterday as weather forecasters warned that Hurricane Joaquin could hit the East Coast in coming days. The company, which makes backup generators, gapped down from the $34 level on Aug. 6 after missing quarterly estimates on the top and bottom lines.
Total option volume in Generac yesterday was 25 times its daily average for the last month. Overall calls outnumbered puts by 10 to 1, reflecting the session's bullish sentiment.
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