CNBC Stock Blog

Options Bulls Pile Into Reynolds American

David Russell|writer, OptionMonster

Reynolds American is near an all-time high, and the bulls can't kick the habit.

More than 4,700 January 37.50 calls were bought in the company, which makes Camel and American Spirit cigarettes, plus several kinds of smokeless tobacco. The first large block priced for $2.85, followed by prints for $2.70 and $2.75 after the shares fell slightly. Volume was more than 5 times open interest in the strike, according to OptionMonster's tracking systems.

RAI fell 0.54 percent to $39.04 yesterday but is up 26 percent in the last year. It's been riding a wave of bullishness in the sector, where rivals such as Altria and Lorillard are also near highs.

The company's next quarterly report will come out before the bell on Tuesday, Oct. 25. It missed estimates the last time it released earnings results on July 22.

Yesterday's calls were in the money—the $37.50 strike is below the stock price—so they will closely track the performance of the shares. For the calls to turn a profit, Reynolds' stock needs to gain at least 3 percent by the time the options expire on Jan. 20.

Overall option volume in the name was triple its daily average in the session.

Second Opinion: What About Lorillard?

—Russell has no positions in RAI.

Options Tips from Jon Najarian

Options Trading School:


David Russell is a reporter and writer for .