Fast-money play in Whole Foods


Whole Foods got hammered on a poor earnings report last month, but now the bulls are back.

optionMONSTER's Heat Seeker tracking system detected aggressive buying in the July 42. The initial blocks priced for $0.27 to $0.30, but the shares worked higher and those contracts inflated to as much as $0.85 by early afternoon.

Long calls lock in the price where the organic-grocery stock can be purchased, letting investors cheaply position for a move higher. The contracts allow them to enjoy significant leverage in a rally, which is exactly what happened yesterday . (See our Education section)

WFM surged 4.43 percent to $40.08. Profits and sales both missed estimates on May 6 as increased competition forced management to lower guidance. That drove the shares down to a key support level from early 2012, where they sat for almost a month.

Volume in the July 42 calls stood at 13,768 by the end of the session, 33 times the strike's previous open interest. The June 40s and July 40s were aggressively purchased as well.

Total option turnover in the name surpassed 105,000 contracts, compared to fewer than 11,000 on a normal day. Overall calls accounted for a bullish 85 percent of the total.

(A version of this post appeared on InsideOptions Pro yesterday.)

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