Bulls think Norfolk will run higher

Norfolk Southern
Norfolk Southern

Option traders are looking for Norfolk Southern to steam ahead in coming months.

The NSC September 77.50 calls were bought for $1.90, along with some July 77.50s snapped up for $0.15. OptionMonster's tracking systems showed that the volume was heavily skewed to the upside, with 9,200 calls traded against fewer than 3,000 puts.

Those calls lock in the price where shares can be purchased, which could provide significant leverage to a rally. Investors use these options to obtain long exposure cheaply and to limit losses in case they get the direction wrong.

Norfolk rose 0.7 percent to $76.16 yesterday. A recent piece by Buckingham Research was bullish on the railroad operator, and rival CSX beat earnings estimates after the closing bell. Norfolk follows with its own quarterly report next Tuesday, July 23.

More than 12,000 contracts traded in the name yesterday, roughly seven times the average amount.

—By CNBC Contributor Pete Najarian

Additional News: Fatal oil train disaster brings scrutiny to oil-by-rail boom

Additional Views: With momentum stalling, is it time to worry?

Options Trading School:


Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com. Najarian owns NSC calls.