(Editor's note: The following is an example of notable trading cited on optionMONSTER's InsideOptions Pro service yesterday.)
Traders are looking for a quick bang from SouFun, which has been trying to bottom out.
optionMONSTER's Heat Seeker system detected huge buying in the February 7 calls on Friday. It first grabbed our attention when about 5,000 contracts were bought in rapid succession, but the options kept building throughout the session. By the closing bell, almost 27,000 had changed hands--more than 10 times the previous open interest in the strike, clearly showing that these are new positions.
Long calls lock in the price where investors can buy a stock, letting them profit from a rally at limited cost. Premiums almost doubled from $0.30 to $0.55 on Friday, which also reflects the kind of leverage that can be generated when shares move in the right direction. (See our Education section)
SFUN rallied as the option activity hit, and it closed up 7.67 percent to $7.02. The Chinese company, which connects real-estate agents with prospective clients, was upgraded to "overweight" by JP Morgan Chase earlier in the week, with a price target of $8.50. Earnings are also due tomorrow morning, and shares have been bouncing from long-term lows on heavy volume recently.
Overall option volume in the name was 45 times greater than average in the session, with calls accounting for a bullish 92 percent of the total.
Disclosure: I am long SFUN.
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