Bullish option traders are piling into Safeway ahead of its earnings report this week.
OptionMonster's real-time tracking systems detected the purchase of more than 4,700 May 25 calls for $0.65 to $0.75 against open interest of just 222 contracts, indicating that these were new positions. Overall option volume in the name was more than 8 times greater than average, with calls outnumbering puts by nearly 50 to 1.
Safeway's stock rose just over 1 percent yesterday (Monday) to close at $24.89. (See ticker for latest prices.)
The grocery chain, along with others such as Supervalu and Kroger, have been running higher in recent weeks and are now outperforming the S&P 500 so far in 2011.
The company beat forecasts for profit and revenue the last time it issued results on Feb. 24, which is saying a lot when you consider it has been a laggard for years. It is scheduled to release its quarterly numbers on Thursday before the market opens.
The stock peaked around $27 last April, and it looks as if the bulls may be expecting a test of that level in the next few weeks. Safeway's shares would need to rise roughly 3.5 percent by expiration on May 20 for the calls purchased yesterday to turn a profit.
Russell has no positions in SWY.
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David Russell is a reporter and writer for OptionMonster.