By Mike Yamamoto of OptionMonster
NEW YORK -- Traders are looking for Dr Pepper Snapple (DPS) to hit new highs by Christmas.
OptionMonster's Heat Seeker system detected the purchase of about 3,400 December 70 calls for $1.30 to $1.55 on Monday, including a print of 2,700 that went for $1.45. The volume was well above the strike's previous open interest of 1,339 contracts, showing that this is fresh buying.
These long calls lock in the price where the stock can be bought through mid-December no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $70.
DPS gained 1.68% to $67.92 on Monday, closing just off its session high. The beverage company spiked to an all-time high of $69.35 after reporting quarterly results on Oct. 23, beating estimates on the top and bottom lines while raising guidance.
Monday's long calls made up the bulk of Dr Pepper's total option volume, which was more than four times its daily average for the last month. Overall calls outnumbered puts by 41 to 1, a reflection of the session's bullish sentiment.
Yamamoto has no positions in DPS.