By Mike Yamamoto of OptionMonster
NEW YORK -- Campbell Soup (CPB) has been rebounding sharply, and option traders cleaned up in a hurry on Friday.
OptionMonster's tracking systems showed quick buying in the December 43 calls, with large blocks hitting for 15 cents to 35 cents early in the afternoon. The shares started climbing almost immediately, and those options shot as high as 95 cents.
These calls lock in the price where a stock can be purchased no matter how far it might climb, giving investors a relatively inexpensive way to position for a rally. They can also tremendous significant leverage to the share price, which is exactly what we saw on Friday.
Campbell's shares were up about 3% when the calls started moving but ended the session higher by 5.34% to $42.24. The food company plunged from the $42 area on Nov. 19 because of weak quarterly results and guidance, but it has now filled that gap.
Almost 20,000 of those December 43 calls would eventually change hands in volume far above the strike's previous open interest of just 1,019 contracts. Overall option volume was 17 times its daily average for the last month, with total calls accounting for a bullish 9-to-1 ratio.
Yamamoto has no positions in CPB.