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Bulls Think Norfolk Will Run Higher

By Pete Najarian, co-founder of OptionMonster

NEW YORK -- Option traders are looking for Norfolk Southern (NSC) to steam ahead in coming months.

The September 77.50 calls were bought for $1.90 Tuesday, along with some July 77.50s that were snapped up for 15 cents. OptionMonster's tracking systems showed that the volume was heavily skewed to the upside, with 9,200 calls traded against fewer than 3,000 puts.

Those calls lock in the price where shares can be purchased, which could provide significant leverage to a rally. Investors use these options to obtain long exposure cheaply and to limit losses in case they get the direction wrong.

Norfolk Southern's stock rose 0.7% to $76.16 Tuesday. A recent piece by Buckingham Research was bullish on the railroad operator, and rival CSX beat earnings estimates after the closing bell. Norfolk follows with its own quarterly report on July 23.

More than 12,000 contracts traded in the name Tuesday, roughly seven times the average amount.

Najarian owns NSC calls.

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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