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Bulls See a Payout in Paychex

By David Russell, reporter at OptionMonster

NEW YORK -- Some traders are betting that Paychex (PAYX) will make new highs later this year.

OptionMonster's tracking programs detected heavy buying in the December 37 calls, with more than 2,500 contracts purchased in volume that dwarfed the previous open interest of just 20 contracts. Premiums rose from $1.22 to $1.40, but most of the options priced in the middle of that range.

These calls lock in the price where investors can buy shares in the payroll processor, which is parked at its highest level in almost five years. If it breaks resistance and continues to run, those options stand to generate significant leverage. And if it drops, traders will lose much less money than they would owning shares.

Paychex shares ended Tuesday's session at $36.41, up 0.78%. The company's most recent earnings report beat expectations on the top and bottom lines, and the next one will probably be released in late June, based on last year's calendar.

Total option volume was five times greater than average in the session, with calls dominating the activity.

Russell has no positions in PAYX.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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