(The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)
The bulls are piling into E-House China as it rebounds from long-term lows.
optionMONSTER's Heat Seeker system showed heavy buying in the November 10 calls yesterday, most of which were purchased for $0.30. We sent an alert on our InsideOptions Pro service after about 7,000 had traded but volume continued to build and surpassed 10,000 contracts by the end of the session. There was no previous open interest at the strike, so new money was put to work.
Long calls lock in the price where investors can buy shares in the extremely volatile Chinese real-estate company. That limits the amount of capital at risk and can result in significant leverage on a percentage basis if a rally occurs. (See our Education section)
EJ, for instance, was up about 3 percent when the options began moving and continued rising until finishing the session at $6.75, a gain of 13 percent. But in that same time, the November calls appreciated more than 30 percent to $0.40.
Other Chinese stocks have been coming to life recently. SouFun , which also operates in the real-estate market, saw bullish call buying earlier in the month and heavy put selling yesterday. China Unicom was targeted on Monday, and Ctrip.com calls from earlier in the month has yield huge gains. JD.com has been another big winner.
Investors may also like EJ because it trades for less than book value and is sitting on a boat load of cash. Yesterday's overall option volume was 124 times greater than average in the name, with calls accounting for a bullish 98 percent of the total.
More From optionMONSTER