By Jud Pyle, CFA, chief investment strategist for the Options News Network
shares are relatively unchanged on the day Tuesday without any news from the company, but at least one investor appeared to take a bullish stance on the insurance company by boosting call volume during afternoon trading.
ALL is currently trading around $32.64, nearly at its 52-week high of $32.77 reached on Monday. The options action we saw cross the tape calls for the stock to make a new 52-week high throughout the later term, and possibly soar to levels the stock has not seen since January 2009.
At 2:14 p.m. EST, a block of roughly 10,000 out-of-the-money July 37 calls changed hands for the ask price of 92 cents per contract vs. current open interest of just seven contracts. This action indicates the investor most likely bought these options to open on a bullish bet that the stock will climb higher than $37.92 throughout the later term. This means investors will make money on this long call position if ALL shares rally at least 16% prior to July options expiration.
The July 37 calls are currently unchanged on the day. Implied volatility of these calls is 20% compared to a 21-day realized volatility of 13%. As the calls appreciate in value along with a potential rally in the stock, call buyers will continue to make money until they decide to sell back the options and take profits.
Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
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."