Traders are betting that Ally Financial will rally in the next five weeks.
About 2,500 January 23 calls were purchased for $0.80 to $0.90 yesterday, according to optionMONSTER's Heat Seeker tracking program. The volume was well above the strike's previous open interest of 768 contracts, showing that this is fresh buying.
These long calls lock in the price where the stock can be purchased through mid-January 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 $23. (See our Education section)
ALLY was off 0.88 percent to close at $22.64 yesterday, reversing gains that had taken it to $23.65 in the morning. The automotive financial-services company fell after reporting earnings in late October but bounced at the $22 level and has been range-bound mostly between $22.50 and $24 for the last month.
Yesterday's total option volume in the name was 2.5 times its daily average for the last month. Overall calls outnumbered puts by 2 to 1.
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