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Bulls looking to take off with Textron

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders are betting that Textron will report positive quarterly results this week.

More than 2,200 October 26 calls were purchased Friday afternoon for premiums that rose from $0.58 to $0.75 as the share price climbed, according to optionMONSTER's Heat Seeker tracking system. The volume was almost double the open interest in the strike at the beginning of the day, indicating new activity.

TXT rose 0.28 percent to $25.49 on Friday. Shares of the company, which manufactures Cessna jets and Bell helicopters, gapped higher at the beginning of the year but have been trading largely sideways since then. The company is scheduled to report third-quarter results in the pre-market on Wednesday.

Friday's call buyers are looking for the stock will gain roughly 5 percent by expiration at the end of this week. If the premiums on those options rise with any rally before then, the traders can sell the calls at a profit earlier. The contracts will expire worthless if the stock falls, but the buyers in that case will have risked only the premiums rather than larger losses from owning the shares directly.

Total option volume in the name was 65 percent higher than its daily average in the last month. Calls outnumbered puts by 22 to 1, a reflection of the day's bullish sentiment.

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