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Intuit Traders Gamble On New Highs

INTU hopefuls scooped up back-month calls

by 9/25/2012 10:31 AM
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Options traders have been waxing optimistic on Intuit Inc. (NASDAQ:INTU - 58.30), with calls flying off the shelves at a rapid-fire rate. During the course of Monday's session, the stock saw close to 2,000 calls change hands -- roughly three times its average daily call volume. For comparison, fewer than 650 INTU puts were exchanged.

Garnering the most attention was the out-of-the-money November 62.50 call, which saw more than 850 contracts traded -- a healthy portion of which crossed at the ask price, hinting at buyer-driven volume. Plus, all of the calls translated into new open interest, confirming our suspicions of fresh initiations. The volume-weighted average price of the calls was $0.50, meaning the buyers will profit if INTU topples the $63 level (strike plus premium paid) -- in record-high territory -- within the next couple of months.

Digging deeper, yesterday's call buyers could've been taking their cues from a weekend Barron's article, in which Northstar Investment Management analyst and consultant James Lane called the stock undervalued. Furthermore, he said the shares could jump nearly 30% in the next 18 to 24 months, as investors continue to underestimate how much Intuit -- which has more than 50 mobile apps -- is being turbocharged by the increasing popularity of mobile devices.

However, even before the upbeat analyst attention, the options crowd was growing more optimistic toward INTU. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than three INTU calls for every put. Plus, the stock's 10-day call/put volume ratio of 3.06 registers in the 72nd percentile of its annual range, pointing to a healthier-than-usual appetite for bullish bets of late.

It's worth noting, though, that peak call open interest in the newly front-month series stands at the October 60 strike, with more than 3,750 contracts in residence. Furthermore, the overhead October 62.50 strike is home to more than 1,700 calls outstanding. In the near term, this abundance of bullish bets could reinforce resistance in the $60-$62.50 region, which has halted INTU's upward momentum in 2012.

On the other hand, the shares have reclaimed a perch atop their 20-week moving average, which ushered INTU higher from October 2011 until early May, and could limit any pullbacks in the intermediate term.

Weekly Chart of INTU since August 2011 With 20-Week Moving Average

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