Fast Money Play in Whole Foods

By David Russell of OptionMonster

NEW YORK -- Whole Foods (WFM) got hammered on a poor earnings report last month, but now the bulls are back.

OptionMonster's tracking systems detected aggressive buying in the July 42. The initial blocks priced for 27 cents to 30 cents, but the shares worked higher and those contracts inflated to as much as 85 cents by early afternoon.

Long calls lock in the price where the organic-grocery stock can be purchased, letting investors cheaply position for a move higher. The contracts allow them to enjoy significant leverage in a rally, which is exactly what happened Thursday.

Whole Foods' shares surged 4.43% to $40.08. Profit and sales both missed estimates on May 6 as increased competition forced management to lower guidance. That drove the shares down to a key support level from early 2012, where they sat for almost a month.

Volume in the July 42 calls stood at 13,768 by the end of the session, 33 times the strike's previous open interest. The June 40s and July 40s were aggressively purchased as well.

Total option turnover in the name surpassed 105,000 contracts, compared to fewer than 11,000 on a normal day. Overall calls accounted for a bullish 85% of the total.

Russell has no positions in WFM.

 

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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