GO
Loading...

Option Traders Chase Big-Cap Names

David Russell | Writer, OptionMonster
Wednesday, 13 Feb 2013 | 6:13 AM ET
AP Photo/Steve Helber
Steve Helber
AP Photo/Steve Helber

Some option traders are apparently afraid that blue chips such as Bank of America and Procter & Gamble will run away from them.

OptionMonster's tracking programs detected unusual activity in both large-cap stocks yesterday in what appeared to be "Hail Mary trades" by money managers who have missed out on the recent rallies: Cheap long-shot bets that will help them save face if the market continues to move higher.

In Bank of America, activity focused on the February 12.50 calls, which saw more than 31,500 contracts trade in volume well above the strike's previous open interest of 4,056, indicating new activity. They initially fetched $0.01 but then ratcheted up to $0.08 as the buying persisted and the shares climbed.

The bulls turned to Procter & Gamble next, snapping up more than 16,000 March 80 calls for $0.08. This was clearly new positioning, as well, as that strike's open interest was just 1,139 contracts at the start of the session.

Calls lock in the price where investors can buy shares. They can generate huge leverage if the stocks move in the right direction, but will expire worthless if shares decline or don't climb far enough and fast enough.

BAC jumped 3.25 percent to $12.24, at one point hitting a 21-month high of $12.34. Its February 12.50 calls expire this Friday, so those buyers are looking for a quick move to the upside.

PG rose 0.22 percent to $75.98. Its March 80 calls have 4-1/2 weeks before they run out of time.


—By CNBC Contributor David Russell

Additional News: 3 Rules for Individuals Who Want to Trade: Cramer

Additional Views: P&G Investors Profited Since Ackman Push: Former CEO


___________________________
Options Trading School:

___________________________
Disclosures:

David Russell is a reporter and writer for OptionMonster. Russell has no positions in BAC or PG.

___________________________

Disclaimer

  Price   Change %Change
BAC
---
PG
---

Featured