Options: Bulls in SunTrust Banks

By Jud Pyle, CFA, chief investment strategist for the Options News Network

Shares of SunTrust Banks (STI Quote) have rallied about 100% since reaching a 52-week low on Feb. 19 (the stock sank to $6.70), and at least one investor made a bullish bet on a continued rally in this name.

Looking at the July 19 calls, an investor bought these contracts more than 5,200 times at 35 cents per contract during the first 15 minutes of trading today when the stock was up 45 cents to $14.25. Current open interest of these calls is 7,000.

This investor is betting that STI shares will expire higher than $19.35 come July expiration. The stock is currently up $1.36, that's almost 10%, to $15.16. The break-even point of these calls shows how far this investor is betting the stock might rise.

The rally in STI shares today could be a result of analyst upgrades on the Atlanta-based bank. A Morgan Keegan analyst upgraded STI to "outperform" from "market perform" because he said dilution concerns have passed. The analyst said this is an attractive entry point. In addition, STI announced plans Monday to expedite TARP repayments and capital-raising. The government told STI to raise $2.2 billion of equity capital after the stress tests.

Bullish call-buying such as this does not automatically mean the shares will charge higher. It is noteworthy that some investors are bullish on a quick rally in these shares before July expiration.

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Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.