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Longer-Term Traders Up the Bullish Ante on AOL, Inc. (AOL)

AOL, Inc.'s April calls are flying off the shelves today

by 1/10/2014 11:20 AM
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Option Brief: Bullish speculators are descending upon AOL, Inc. (NYSE:AOL) in droves today, as roughly 14,000 calls have switched hands thus far -- a whopping 50 times the intraday norm. By comparison, just 77 puts have been exchanged. Digging deeper into the data, it looks as though some traders are forecasting notable gains for the Internet stock over the next few months.

To be more specific, nearly 13,600 calls have crossed at the April 55 strike, including a block of 9,358 contracts. The vast majority of these options traded at the ask price, suggesting they were bought. Meanwhile, today's volume at this strike has exceeded present open interest levels, and implied volatility has ticked 3 percentage points higher, signaling the creation of new long positions.

By purchasing the calls to open, the traders are counting on AOL to ascend past $55 between now and April options expiration -- reflecting expected upside of about 21.1% to the stock's current price at $45.40. However, should the shares stay south of the strike price through the close on Friday, April 18, the call buyers will simply part with the initial premium paid.

AOL, Inc. (NYSE:AOL) has been an outperformer on the technical front, advancing around 52% during the past year, and besting the broader S&P 500 Index (SPX) by north of 28 percentage points over the last three months. What's more, the stock is poised to finish another week atop its 10-week moving average, which has served as support since late October.


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