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Wells Fargo is flirting with new highs, and options traders are getting active.
Heavy volume was detected yesterday in the bank's September 97.50 calls. The initial blocks priced for $1.44, followed by larger blocks at $1.65. Volume of 27,990 contracts was more than 10 times open interest, which suggests new money was put to work.
Calls fix the price where investors can purchase a security. They can gain value rapidly when shares appreciate but can also expire worthless when a stock doesn't move enough.
WFC ended the session up 1.7 percent to $81.49 and is challenging its previous record high from February 6. The stock climbed last week after passing Federal Reserve's stress tests. RBC Capital raised its price target from $75 to $80 on Monday.
Tuesday's call buyer may expect further gains over the summer. By choosing September calls, he or she has upside exposure to events like earnings on July 15 and results from other financials.
Overall options volume was slightly above the monthly average, according to TradeStation data. Calls accounted for a bullish 76 percent of the total.
Wells Fargo (WFC), daily chart, with select patterns and indicators.
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