Bulls Hungry for Dunkin' Brands Group, Inc. (DNKN) Call Options

Dunkin Brands Group Inc (DNKN) calls are on fire once again

Jan 13, 2015 at 11:48 AM
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Doughnut king Dunkin Brands Group Inc (NASDAQ:DNKN) is flirting with a 3.6% gain at $45.67, likely thanks to upbeat comments from CEO Nigel Travis. In the options pits, DNKN calls are flying off the shelves at 40 times the typical intraday pace, and the stock's 30-day at-the-money implied volatility has jumped 4.9% to 31.1%, signaling elevated demand for near-term contracts.

Attracting the most attention is the March 47.50 call, which has seen a mix of buy- and sell-to-open activity. "Vanilla" buyers expect DNKN to surmount $47.50 by the close on Friday, March 20, when the back-month options expire. In light of today's advance, delta on the call has jumped to 0.39 from 0.28 at yesterday's close, implying a roughly 39% chance of the contract expiring in the money.

Today's affinity for DNKN calls merely echoes the growing trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where traders have bought to open nearly 10 calls for every put during the past two weeks. The resulting 10-day call/put volume ratio of 9.80 stands higher than 71% of all other readings from the past year, pointing to a healthier-than-usual appetite for bullish bets of late.

Since suffering a steep bear gap in mid-December, Dunkin Brands Group Inc (NASDAQ:DNKN) has made serious headway, climbing 10%. However, the shares are now staring at their 50-week moving average -- currently lingering near $46 -- which has acted as both support and resistance over the past year.

Weekly Chart of DNKN since January 2014 with 50-Week Moving Average


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