Sturm, Ruger & Company (RGR) Option Bulls Eye Higher Highs

Sturm, Ruger & Company (RGR) is fresh off an annual high

by Alex Eppstein

Published on Jan 5, 2016 at 12:04 PM
Updated on Jun 24, 2020 at 10:16 AM

Sturm, Ruger & Company (NYSE:RGR) has shot to new highs today, amid President Obama's newly announced gun control policies. At the heart of his plan, Obama intends to expand via executive order the number of firearm sales subject to background checks. Nonetheless, the stock is rallying big for the second day in a row, and option traders see even more room to run.

Boosting RGR is a price-target hike to $70 from $63 at BB&T, which also weighed in bullishly on this sector peer. At last check, the shares are up 6.8% at $65.58, and earlier touched an annual peak of $66.93. In fact, though 2016 is less than two days old, the stock has already surged over 10%.

Not surprisingly, sentiment in RGR's options pits is very upbeat today. Calls are being exchanged at 13 times the expected intraday rate, with buy-to-open activity at the January 2016 70-strike and February 67.50 calls. In other words, these buyers think the shares will muscle above the strikes -- and reach even higher heights -- by the respective expiration dates.

It's not unusual for traders to be buying calls over puts. During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 2.56 calls for each put. The corresponding ratio, however, ranks in the middling 50th percentile of its annual range. In short, today's appetite for bullish bets over bearish is business as usual.

As discussed earlier, Sturm, Ruger & Company (NYSE:RGR) has shown major technical tenacity of late. To put its performance further in perspective, during the past 40 sessions, the stock has outperformed the broader S&P 500 Index (SPX) by over 30 percentage points.

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