ADP Sees Bullish Move
CHICAGO (
) -- Although
Automatic Data Processing
(ADP) - Get Report
did not announce any news Friday, it attracted a bullish options move.
The company is scheduled to announce earnings on April 27 before the market opens. While the market anticipates earnings of 78 cents per share, at least one options investor is calling for further upside in the stock throughout the next month prior to the earnings release.
ADP shares have dropped 17 cents to $43.76 so far today. The stock reached a 52-week high of $44.50 in November, and dipped to a recent low of $40 last month. Options action during today's sessions suggests an investor expects even further upside during the near-term.
Around 11:02 a.m. EST, the front-month March 43 calls and the April 45 calls crossed the tape 5,000 times each. It looks like an investor sold to close the in-the-money March 43 calls and bought to open the out-of-the-money April 45 calls on a bullish bet that the stock could rally another 3% by April options expiration, or that the stock could rally before expiry and provide a chance to sell them back for a profit.
The investor collected around 50 cents per roll, despite maintaining a bullish position in ADP. The March 43 calls traded for 95 cents per contract, while the April 45 calls crossed at 45 cents per contract.
Implied volatility of the front-month options and the April 45 calls is roughly 16%, compared to a 30-day historical volatility of 17%. The March 43 calls, home to current open interest of more than 7,000 contracts, have gained five cents on the day, while the April 45 calls are unchanged on the day and are home to current open interest of 176 contracts.
Though ADP shares are slightly down on the day, at least one investor might not be finished with the stock and rolled a long position out and up.
-- Written by Judd Pyle in Chicago
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."
