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Bulls Are Riding Harley-Davidson

By David Russell of  OptionMonster

NEW YORK -- Harley-Davidson (HOG) has struggled with bad weather and recalls, but bullish option traders were piling into the name on Wednesday. 

OptionMonster's tracking systems detected the purchase of almost 3,900 September 65 calls, most of which priced for 28 cents to 35 cents. Volume surpassed previous open interest of 2,722 contracts, which indicates that new money was put to work. 

These long calls lock in the price where investors can buy shares in the motorcycle maker, letting them profit from a rally with limited capital at risk. The contracts can also generate significant leverage if stock moves in the right direction, but they will expire worthless if shares remain below $65 for the next 2-1/2 weeks. 

Harley-Davidson rose 0.25% to $63.48 on Wednesday and is attempting to bounce off its 52-week lows around $60.50 a month ago. Sales missed expectations the last time results were announced in July, but management has predicted stronger business as its new Street models hit showrooms. 

Total option volume was five times greater than average in the session, with overall calls outnumbering puts by a bullish 7-to-1 ratio. 

Russell has no positions in HOG

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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