Why Are Options Piling into Dollar Tree?
Dollar Tree ripped to a new all-time high today after beating earnings estimates, and bullish option traders are looking for even further upside.
The stock rose as much as 6.3 percent to $52.20 before pulling back to $51.28 this morning. OptionMonster's real-time tracking systems detected new money flowing into the December 50 calls, which traded 3,428 times against open interest of 1,843 contracts.
Institutional-size buyers were active at the $2.25 level, while others sold calls for $2.70 to earn premium.
Before this morning's opening bell DLTR reported better-than-expected fiscal third-quarter profit and raised full-year guidance as shoppers increased their reliance on the discount chain as economic problems persist. The stock has been consolidating above its old high of $45 and a new high of $50 since July. With today's strong earnings report, the call buyers are positioning for it to break out on a new bullish run.
DLTR needs to climb about 2 percent by expiration for today's options to turn a profit. Other investors purchased the February 55 calls for $1.35 to $1.73, although volume was below open interest.
Overall options activity in the name was triple the average level, with calls outnumbering puts by about 4 to 1.
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David Russell is a reporter and writer for OptionMonster.