Call Buyers Stay Busy as Whole Foods Market, Inc. (WFM) Pops

Whole Foods Market, Inc. (WFM) is being targeted by long-term option bulls

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Published on Jan 21, 2015 at 11:08 AM
Updated on Apr 20, 2015 at 5:32 PM

Whole Foods Market, Inc. (NASDAQ:WFM) is rallying this morning on the heels of an upgrade to "buy" from "neutral" at Sterne Agee. In addition, the brokerage firm set a price target of $60 -- in annual-high territory -- and lifted its earnings estimates for this year and next. At last check, the shares were up 3.1% at $52.92. Accordingly, call volume has exploded, running at more than triple the expected intraday rate.

Digging deeper, we see that long-term bulls have been active. Specifically, WFM's most active option is the January 2016 40-strike call. While these contracts are currently deep in the money, the traders are looking for the stock to muscle atop the at-expiration breakeven mark of $54.49 (strike plus the volume-weighted average price of $14.49) by the close on Friday, Jan. 15, 2016 -- when the LEAPS cease trading.

From a slightly wider perspective, call buying has picked up in recent weeks. Specifically, during the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WFM has racked up a call/put volume ratio of 3.82 -- higher than 88% of all comparable readings from the last year.

This rush of bullish betting comes amid the stock's recent display of technical strength. Since bottoming in the $36 area in mid-October, Whole Foods Market, Inc. (NASDAQ:WFM) has surged nearly 47% -- helped by an earnings-induced bull gap in early November.


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