Eastman Chemical broke out of a three-month range this week, and one trader is making a large bet that the stock will continue rising into 2010.
Nearly 80 percent of yesterday's option activity in the name took place in a single block of 4,500 calls bought at the January 60 strike for $2.70 yesterday afternoon, according to OptionMonster's real-time tracking systems. The strike's activity was far above the average daily volume of 6 calls and nine times the open interest of 541 contracts, reflecting newly established positions.
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Eastman Chemical fell 2.07 percent yesterday to $58.09. The shares would need to rise at least 8 percent for the January 60 calls to turn a profit.
The stock has traded sideways since early August with resistance around $56 and $57, but Monday it finally broke above that level and hit a new 52-week high of $59.45 before closing slightly lower. Interestingly, that was the same day that Barron's reported a $6.5 million stock sale by former Eastman CEO J. Brian Ferguson last week.
The chemical company beat analysts' estimates on earnings and revenue when it released its third-quarter results on Oct. 22. Eastman's next scheduled event is an "Investor Day for Chemical Industry Analysts" on Nov. 17.
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Mike Yamamoto is an analyst and writer for OptionMonster.