Upside option trading hit VMware early Tuesday as buyers looked for the tech stock to rally.
OptionMonster's tracking systems show that about 3,000 December 82.50 calls traded for 75 cents in the first few minutes of the session, then kept on building throughout the day. Some 8,500 would change hands by the closing bell in volume well above the strike's previous open interest of 2,120 contracts, going for premiums as high as $1.20.
These calls lock in the price where the stock can be purchased no matter how far it might climb, letting investors cheaply position for a move higher. The contracts can generate significant leverage if a rally unfolds but will expire worthless if shares remain below $82.50 through mid-December.
VMware shares were down at $79.25 at the time of the initial call buying but then reversed higher and closed the session up 0.69% to $80.06. The data-storage infrastructure and virtualization-technology company was near $90 in September.
Overall calls in the name outnumbered puts by 12,300 to 1,500, reflecting the session's bullish bias. Total option volume was quadruple its daily average in the last month.
Najarian owns VMW shares.