Option traders have seen bullish positions in Monro surge sevenfold since they were opened this summer.
On July 12, Investitute’s proprietary programs cited the purchase of 3,100 January $55 calls for $0.60 to $0.70 with shares at $39.85. Open interest in the strike was only 16 contracts before the trades occurred, showing that this was fresh buying.
Those calls were marked at $4.25 today, 7 times their original purchase price. The stock surged 47 percent in the same time period, a huge gain but still far below that of its options on a relative basis.
Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.
MNRO rose 0.52 percent to $58.55 today. The auto-repair company broke out from a bullish “cup and handle” technical pattern on strong volume Monday.