Sotheby's New Record Auctions Get Bulls to Raise Their Paddles

NEW YORK (TheStreet) -- The art market has made headlines with record-breaking auctions this week, and option traders are raising their paddles to bid on Sotheby's (BID).

More than 2,200 July 44 calls were purchased for $1.95 to $2.13 late Thursday, according to OptionMonster's Heat Seeker tracking program. This represents fresh buying, as open interest in the strike was just 232 contracts before the trades occurred.

Long calls lock in the price where investors can buy a stock, which lets them position for a rally with limited capital. That can be safer than purchasing shares directly because only the cost of the options can be lost on a pullback. The calls can be sold any time before they expire but will lose value if the stock falls.

Sotheby's shares rose 0.29% to $44.58 Thursday, not far from their 52-week high of $45.41 reached in February. The auction house swung to a first-quarter profit on Monday, beating estimates on the top and bottom lines with higher commissions.

On Monday, Pablo Picasso's "Women of Algiers" and Alberto Giacometti's "Pointing Man" sold for the respective prices of $179.4 million and $141.3 million, setting records for the most expensive painting and sculpture. Although those works were part of an auction by archrival Christie's that raised $705.9 million, Sotheby's followed the next day with an auction of its own that brought in $379.7 million. Both events have continued all week.

Yesterday's total option volume in Sotheby's was more than triple its daily average for the last month. Overall calls outnumbered puts by more than 11 to 1, reflecting the session's bullish sentiment.

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