did not report any news Tuesday morning, and the market does not expect earnings figures until the beginning of February, but at least one investor is looking for further upside in the stock throughout the next five months.
The out-of-the-money May 75 calls have crossed the tape more than 5,000 times during the morning trading sessions versus open interest of just 105 contracts, indicating investors traded these options to open.
The calls have climbed 30 cents to roughly $1.55 per contract and have a 22-delta, which means the options are trading much higher than their delta would suggest. The breakeven on this call purchase is $76.55. Investors are looking for the stock to climb at least 24% throughout the next five months before entering profitable territory.
Call buying activity has pushed implied volatility of the May 75 calls up to 33 today, compared to a 30-day historical volatility of 31%.
We also saw bullish call buying in CEPH in October, when an investor bought the December 60 calls with the stock trading at $54.75. The stock has since rallied roughly 13% to $61.94, and we're seeing at least one investor call for continued upside in the stock.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not have a position in the stock mentioned. 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."