Fast Money in Hologic Calls

By David Russell of OptionMonster
 
NEW YORK -- Hologic  (HOLX) rallied on a strong quarterly report late last month, and the bulls were back Wednesday.
 
OptionMonster's tracking programs detected heavy call volume in the medical-imaging company halfway through the morning. Some 2,200 May 24 calls were bought initially for 30 cents, along with 1,900 September 26 calls for 75 cents. Volume was well above the previous open interest in each strike, indicating that new money was put to work.
 
Long calls lock in the price where a stock can be purchased, letting investors cheaply position for a rally. They can also generate significant leverage if shares move in the right direction, which is exactly what happened Wednesday.
 
Hologic was little changed when the trades hit, then shares started to climb and ended the session up 3.81% at $24.51. But that move was nothing compared with the gains in the options, as the May calls would more than double to 70 cents while the Septembers inflated to as much as $1.10.
 
The company's quarterly earnings and revenues beat expectations on April 30. Management also raised guidance amid strong demand for its mammography and HPV products.
 
The stock has been running since the news came out and is now back to levels last seen in the first half of 2008. OptionMonster co-founder Pete Najarian chose Hologic as his "final trade" on CNBC's "Halftime Report" Wednesday.
 
Total option volume in the name was eight times greater than average, with calls outnumbering puts by a bullish 46-to-1 ratio.
 
Russell has no positions in HOLX.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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