By David Russell of OptionMonster
(CIT) CIT releases earnings next week, and the bulls piled in Tuesday.
OptionMonster's tracking systems detected heavy buying in the February 52.50 calls. The largest block of 4,500 contracts went for 42 cents, accounting for more than half the 8,250 that were purchased. Volume was 98 times previous open interest, so new money was clearly put to work.
These calls lock in the price where shares can be purchased in the small-business lender. They provide cheap exposure to gains and can let investors generate significant leverage in a rally, but the contracts will expire worthless if shares remain below $52.50 through mid-February.
CIT shares declined 0.52% to $49.64 Tuesday, pulling back to their 100-day moving average for the first time in more than a month. Quarterly results come out on Jan. 28, and Tuesday's traders now stand to profit from the stock gapping higher on a strong report.
Total option volume was 13 times greater than average in the session, with calls outnumbering puts by a bullish 16-to-1 ratio.
Russell has no positions in CIT.