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Bulls are piling into Waste Management

David Russell (david.russell@optionmonster.com)

Waste Management has broken out to new highs, and the bulls are betting that there's no going back for the garbage-disposal company.

optionMONSTER's Heat Seeker monitoring system detected the purchase of some 7,800 October 42 calls, with premiums ratcheting up from $1.10 to $1.30. Volume is 9 times greater than average at the strike.

Long calls lock in the price where investors can buy shares in the trash hauler. Given their cheap cost now, they can generate significant leverage if the stock continues to climb. For instance, a gain of just 10 percent over the next five months will more than double the initial investment. Another benefit is that investors risk much less capital than they would buying shares. (See our Education section)

WM is up 1.07 percent to $41.94 this afternoon and 24 percent so far this year. While earnings have generally missed expectations, investors have piled into the name on hopes that it will transform itself into a tax-free real-estate investment trust.

In the last week, the stock has been finding support above the same $41 level where it peaked in 2007. That could be leading some chart watchers to believe that it will now continue to rally, perhaps filling a bearish gap that occurred way back in July 1999. If they're correct, it could translate into a move above $50.

Total option volume in the name is triple its daily average so far in the session, according to the Heat Seeker. Calls outnumber puts by 25 to 1.

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