NEW YORK -- Option traders are looking for Tiffany
(TIF) to rebound from its sharp selloff earlier in March.
More than 5,000 May 87.50 calls traded in a strong buying pattern Monday with premiums ranging from $1.55 to $2, according to OptionMonster's tracking systems. Volume was far above the strike's previous open interest of 451 contracts, indicating that new positions were established.
These long calls lock in the price where the stock can be purchased through mid-May no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $87.50.
Tiffany shares gained 1.29% Monday to close at $86.15. The iconic jeweler hit an all-time high of $94.88 on March 6 but pulled back after its last earnings report two weeks ago, and the stock is trying to hold support at the $85 level reached at the end of last week.
Total option volume in the name topped 7,200 contracts Monday, more than double its daily average for the last month. Overall calls outnumbered puts by a bullish 11-to-1 ratio.
Yamamoto has no positions in TIF.