Calls bet American Airlines will fly
(The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)
American Airlines flew higher yesterday, and the bulls were onboard.
optionMONSTER's Heat Seeker program detected buying in the Weekly 39.50 calls early yesterday, with traders snapping up 5,800 contracts for $0.27. Volume was more than 6 times open interest at the time, which indicated new money being put to work.
Long calls lock in the price where investors can purchase shares, allowing them profit from rallies with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis, which happened yesterday because the Weekly 39.50s almost doubled to $0.48 by the closing bell. (See our Education section)
AAL ended the session up 3.6 percent to $38.65. The stock has been trying to hold $38 after the market's recent slide to 10-month lows. The company has fared worse than major competitors Delta Air Lines and United Continental, which both remain positive on a trailing 12-month basis.
Overall option volume was almost triple average amounts in the session, with calls accounting for a bullish 71 percent of the total.
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