By David Russell, reporter at OptionMonster
NEW YORK -- Airplane and helicopter maker Textron (TXT) popped Wednesday, and option traders are betting that it will keep gaining altitude.
OptionMonster's tracking programs detected the purchase of about 5,800 January 26 calls in volume that was far above the previous open interest of 663 contracts, indicating that this is fresh buying. Premiums started at 24 cents and rose along with the stock price, fetching 28 cents near the close of the session.
Calls lock in the price where investors can buy shares and can generate significant leverage relative to the underlying equity. But if the stock doesn't move by expiration in about two weeks those contracts will lose all their value.Textron's shares rose 2.78% to $25.48 Wednesday. The stock has been grinding sideways for the last two years and remains well below its levels before the market crashed in 2008. Overall option volume in the name was 15 times greater than average in the session, with calls accounting for a bullish 80% of the total. Russell has no positions in TXT