By David Russell of OptionMonster
NEW YORK -- World Wresting Entertainment (WWE) generated huge profits in March, and now the bulls are back.
OptionMonster's tracking programs detected the purchase of more than 10,000 July 22.50 calls for 85 cents on Wednesday. That was more than twice the strike's previous open interest of 4,693 contracts.
Long calls lock in the price where the entertainment stock can be purchased, letting investors cheaply position for a rally and delivering potentially significant leverage if they get the direction right. That is exactly what happened Wednesday.
World Wrestling's stock was down 2% when the calls hit, but it quickly started to climb and ended the session up 5.16% to $19.35. The options almost doubled in that time to $1.55.
Traders have become accustomed to big paydays in the name since the July 30 calls spiraled up from $1.60 to $5.80 two months ago. The stock appreciated about 40% at the same time, then lost almost half its value along with the selloff in other media companies. It is now trying to bounce at its 200-day moving average.
Total option volume in the name Wednesday was almost 6 times its daily average for the last month, with calls outnumbering puts by more than 10 to 1.
Russell has no positions in WWE.