NEW YORK -- Option traders on Tuesday woke up and smelled the coffee at Dunkin' Brands (DNKN) .
OptionMonster's Heat Seeker system detected call buying within minutes of the opening bell. The March 47.50s initially traded for $1 to $1.19 but worked higher along with the stock and hit $1.80 by late morning. More than 13,400 contracts would change hands in the strike by day's end, quadruple the previous open interest.
The long calls moved so much because they lock in the price where investors can buy shares in the iconic coffee-and-doughnut company. That limits the amount of capital at risk while providing potentially significant leverage.
Dunkin' Brands rose 4.08% to $45.88 on Tuesday. The stock opened higher and kept running throughout the session despite weakness in the broader market. Shares cratered last month after management cut guidance, but they've been working their way back as strong employment and cheap gasoline draw investors to casual-dining names.
Overall option volume was 28 times greater than average, with calls accounting for a bullish 96% of the total. The June 50 calls were also bought for $1.50.
-- Written by David Russell of OptionMonster