Those calls lock in the price of buying the stock in the next three months. Earnings come out this morning, so the traders are clearly looking beyond that event and are viewing the future through some rose-colored glasses.
If SunTrust rallies, the calls have the potential to appreciate significantly because they’re so cheap. But if no move occurs, they will expire worthless.
Suntrust shares fell 2.02 percent to $24.24 in yesterday's session. Total option volume was almost 11 times greater than average in the name.
Additional News: Banks in Libor Probe Consider Group Settlement: Sources
Additional Views: Despite Failing Stress Test, SunTrust Is a ‘Buy’: Cramer
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Options Trading School:
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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com. Najarian has no positions in SunTrust.
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Disclaimer