Call option volume in the owner of Marshall's and TJX Stores, TJX Companies , surged Monday with volume in two strikes surpassing open interest, along with rising implied volatility.
"It's unconfirmed LBO speculation," said Paul Foster, options strategist at Theflyonthewall.com.
July 30 call volume surged passed 16,000 contracts versus previous open interest of 6.455 contracts, an indication of heavy buying interest. August 30 call volume also shot past 6,700 contracts, eclipsing previous open interest of 2,104 contracts.
The aggressive volume in the July 30 calls is noteworthy since those options, a bet the stock will rise to 30 or higher, will expire in less than two weeks. Foster says market participants buying those calls feel "they have enough of an advantage" so close to expiration.
Prior to today's speculation, the July 30 calls appeared to be coasting toward becoming worthless as expiration neared, but with today's sudden interest the calls are up 550% at a bid of 65 cents.
A spokesman for TJX did not immediately return a phone call seeking comment.
It's a Wall Street tradition that Alcoa is the first of the 30 companies that make up the Dow Jones Industrial average to post quarterly earnings and mark the start of earnings season.
Alcoa will post its numbers after the bell Monday and is expected to post earnings of 81 cents a share.
Options activity in Alcoa was biased toward purchase of call options, or bets the stock would rise following earnings.
Call volume exceeded 30,000 contacts Monday verses put volume of 8,000 contracts, or a margin of nearly 4 to 1 in favor of the call.
Foster says that's a clear indication that "investors are hedging for potential upside in Alcoa shares".
Beyond Alcoa, Foster notes that buying of options in the overall market ahead of earnings season has been less robust. He says, "the bullish call action has not been as aggressive when the market was lower 18 to 20 months ago. As markets have rallied, I've observed more neutral hedging."