Western Union has been getting sold along with the rest of the market, but option traders are betting on a rebound.
OptionMonster’s tracking systems detected the purchase of more than 7,000 August 17 calls in the money-transfer stock for $0.55 yesterday. The volume was almost 22 times the previous open interest in the strike, indicating that these are new positions.
Those calls lock in the price that traders must pay to buy the stock, so they can generate major leverage in the event of a rally. The same options will expire worthless, however, if the shares don’t move.
Western Union shares rose 1.38 percent to $16.40 yesterday, but are still down 10 percent so far this year. The stock gapped lower in February after a weak earnings report, but management signaled that business was improving when the next set of results were released in April.
Total option volume was almost eight times greater than average yesterday. Calls outnumbered puts by 10 to 1, reflecting the session’s bullish sentiment.
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in Western Union.