Leveraged trade stays in Wells Fargo


Wells Fargo has been climbing along with the other banks, and one investor expects a rally in the long term.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,590 January 2015 25 calls for $10.20 and the sale of an equal number of January 22.50 calls for $11.90. Volume was below open interest in the 22.50s, indicating that an existing long position was closed and rolled forward in time.

WFC fell 0.26 percent yesterday to $34.33 , which means that those calls deep in the money . The investor is probably using them as a surrogate for owning the slow-moving stock. With a delta of more than 0.80, the options will track almost all the upside over the next two years, yet cost only one-third as much as the stock.

Rolling the position today saved them from automatically buying shares on expiration 3-1/2 weeks from now. The investor also received a credit of $1.70. (See our Education section)

Total option volume in WFC was nearly twice its daily average yesterday despite unusually light activity in the broader market. Calls outnumbered puts by 2 to 1, a reflection of the bullishness toward the name.

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