By Mike Yamamoto of OptionMonster
NEW YORK -- Walgreen (WAG) reached new all-time highs Tuesday, and the bulls were looking for even more gains.
OptionMonster's tracking systems detected heavy buying in the March 65 calls, with premiums more than tripling from 55 cents to $1.68 as the session unfolded. More than 12,000 changed hands against previous open interest of just 127 contracts, with more than two-thirds of the total trading in a single block of 8,288 that was purchased for the ask price of 82 cents.
These calls lock in the price where shares can be purchased through mid-March at a fraction of the cost of the stock itself. The contracts can provide substantial leverage in profiting from a move higher while limiting the amount of capital at risk.
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Walgreen shares surged 5.85% to finish Tuesday at $64.20 after peaking at $64.71 just minutes before the close. The drugstore chain fell for most of January but bounced off support around $56 early this month, erasing the earlier losses as monthly same-store sales beat forecasts last Thursday. The stock is also up more than 10% since being recommended during our proprietary Market Action webinar on Feb. 5.
Overall option volume was eight times greater than average, with calls accounting for a bullish 63% of the total.
Yamamoto has no positions in WAG.