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LEAPS Trader Bets House on TD Ameritrade Holding Corp. (AMTD)

Call buyer anticipates AMTD will reach multi-year high by January

by 5/21/2013 12:29 PM
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Options trading is exploding on TD Ameritrade Holding Corp. (NYSE:AMTD), and most of the action is occurring on the call side of the equation, where intraday volume is 32 times the norm. Of the 75,000 call options that have traded, one of the most active is the January 2014 26.50-strike call. Trade-Alert indicates that some of this volume may also be rolling out existing calls from the August 23 strike, suggesting the trader may be thinking longer term (and higher prices).

The vast majority of those AMTD LEAPS hit the tape in a single block trade of 25,600 contracts. They traded at the ask price of $0.65, which suggests they were bought; and a corresponding uptick in implied volatility implies the creation of new positions. Today's big trader, therefore, expects TD Ameritrade to advance to $27.15 (strike price plus premium paid) from its current slot of $22.45, prior to January expiration. If the online brokerage firm falls short of the strike price, however, he would forfeit no more than his initial net debit.

The optimism is just more of the same for AMTD, which boasts a lofty 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 12.1. In laymen's terms, calls bought to open outpace puts by about 12-to-1 -- a ratio that has been topped just 7% of the time over the past year.

It's no wonder, either. TD Ameritrade has been on a technical tear, tacking on more than 33% in 2013, and gaining support from its 20-week moving average, which contained a pullback earlier this month.

Nevertheless, in order for today's bullish trader to finish in the money, TD Ameritrade Holding Corp. (NYSE:AMTD) would need to reach territory that it hasn't explored since Jan. 2006, when the shares peaked at $26.37.


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