About 4,500 September 52 calls were purchased at the same second Wednesday afternoon, all of them for $2.05, according to OptionMonster's tracking systems. This is clearly fresh buying, as open interest in the strike was just 159 contacts before the trade appeared.
These long calls lock in the price where the stock can be purchased through mid-September no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will quickly lose value if shares pull back.
Dow gained 1.02% to $53.64 on Wednesday with reports that the company may sell two specialty-chemical units. The stock has been trending higher for more than a year and is now at its highs from 2005.
Total option volume reached 44,000 contracts Wednesday, compared to a daily average of 8,034 for the last month. Overall calls outnumbered puts by 5 to 1, a reflection of the session's bullish sentiment.
Najarian is long DOW; Yamamoto has no positions in the name.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV