Financials have been on a northward journey for months, and the bulls want to go places with MetLife.
optionMONSTER's Heat Seeker program on Friday detected the purchase of 20,000 January 45 calls for $1.15 and the sale of an equal number of January 50 calls for $0.40. Volume was more than 6 times open interest at both strikes, indicating that new positions were initiated.
With this vertical spread , the investor has a right to buy the life insurer's stock for $45 but must sell it for $50 if it goes to that level or higher. The trader paid $0.75 for that $5 spread, which would translate into a profit of 567 percent if MET goes to the top of that range--massive leverage, given the price of the options compared with the stock. (See our Education section)
MET rose 2.3 percent to $38.20 on Friday and is up 25 percent in the last six months. That's more than twice the performance of the S&P 500 in the same period.
Investors have been piling into financials recently, drawn by the sector's improving business profile and relatively cheap prices. MET, for instance, trades for barely half its book value.
Total option volume was 8 times greater than average in the session, with calls outnumbering puts by a bullish 5-to-1 ratio. MetLife's next earnings report is scheduled for Feb. 14.
(A version of this post appeared on InsideOptions Pro on Friday.)
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