After weeks of positioning for Sherwin-Williams to move lower, sentiment swung sharply to the positive side yesterday (Monday), as traders positioned for the paint maker to break out toward the $70 area.
The April 70 calls were the most active strike, trading 15,271 times against open interest of just 3,135 contracts, according to OptionMonster's OptionMonster's Heat Seeker tracking system. The aggressive buying drove premiums from $0.14 early in the session to as high as $0.40.
SHW stock rose 0.70 percent to $65.76. The stock gapped higher amid bullish guidance on Jan. 26, and since then has been pushing against resistance at the $66 level while making incrementally higher lows.
Yesterday's call buyers are apparently positioning for SHW to stage a quick rally if it breaks free to the upside. The company has been benefitting from unsubstantiated takeover rumors and strength among chemical stocks, which have been outperforming the broader market this year.
The call buying came after heavy put buying on Friday as an investor positioned for a pullback, and call selling in late February. Overall options activity in the name has been bearish, with puts constituting an average 63 percent of the volume over the previous 20 sessions.
That proportion changed yesterday when calls accounted for 92 percent of total activity.
New money also flowed into the May 75 calls, which changed hands 3,110 times for $0.20 to $0.40, and the May 70 calls, which traded 1,723 times —mostly for $1.10 to $120. There was no open interest in either strike.
Overall options volume in SHW was 13 times greater than average in the session.
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Options Trading School:
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Sherwin-Williams' Peers & Rivals:
Dow Chemical
Calgon Carbon
Rockwood Holdings
Lubrizol
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David Russell is a reporter and writer for OptionMonster.
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Disclosures:
David Russell has no positions in SHW.