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The market had a nice rally with increasing volume on Monday. The Nadaq led the three major indices with 1.32% gain. The S&P 500 gained 1.19% while the Dow Jones also increased by 0.76%. QQQ closed at $65.55, which was above its 50-day MA of $65.43 and 200-day MA of $65.41. By closing at $143.77, [[SPY]] was getting further from its 50-day MA of $141.77. DIA was also going further away from its 50-day MA of $130.75 and closed at $132.44. All sectors had a nice boost on Monday, where the financial sector led the gain with a 1.36% increase and the consumer non-cyclical sector lagged with only 0.11% gain.

For the NYSE, 2,053 stocks advanced, 1,007 declined, and 99 stayed neutral. For the Nasdaq, 1,717 stocks advanced, 766 declined, and 110 stay unchanged. The top three stocks with unusual call activities on Monday have been identified and are presented below for investors to research further.

Name (Ticker)

Call Volume

Average Call Volume

Daily Volume Ratio

Paychex, Inc. (PAYX)

49,462

2,970

16.65

NRG Energy (NRG)

15,538

1,776

8.75

Abercrombie & Fitch Co. (ANF)

16,454

5,559

2.96

Source: Schaeffer's Research

Paychex, Inc.

PAYX is a provider of payroll, human resource, and benefit outsourcing solutions for small to medium-sized businesses. PAYX was created from the consolidation of 17 payroll processors in 1979. It is the second-largest player in terms of revenue and services with about 550,000 clients.

PAYX closed at $33.92 with an 0.62% gain on Monday. PAYX is approaching its 52-week high of $34.70. The MACD (12, 26, 9) has been showing a bullish sign since November 23 and the MACD difference had been converging since December 12. The momentum indicator, RSI (14), is showing a strong buying momentum at 70.44, which is also in overbought territory. PAYX closed above its R1 pivot point, $33.02, and the next resistance is $34.14, its R2 pivot point, as seen from the chart below.

(click to enlarge)

Source: StockCharts.com

The unusual high volume of call could be mainly due to PAYX's ex-dividend date, which was scheduled for December 18, 2012. As reported from Nasdaq:

Paychex, Inc. has announced an ex-dividend date of December 18, 2012 and a cash dividend payment of $0.66 per share scheduled for December 28, 2012. Shareholders who purchased PAYX stock prior to the ex-dividend date are eligible for the cash dividend payment.

The most active call was the January 18, 2013 call at the strike price of $30.00 with a volume of 83,300 and an open interest of 1,797. The implied volatility is 31.1, and the chance of breakeven is 46.51. The second most active call was the December 21, 2012 call at the strike price of $32.00 with a volume of 41,918 and an open interest of 2,698. The implied volatility is 32.4, and the chance of breakeven is 48.32. The historical volatility for PAYX is 9.19 for 1 month, 13.57 for 3 months, and 14.80 for 1 year.

NRG Energy

NRG is an integrated wholesale power generation and retail electricity company. As an independent power producer with more than 25.5 GW of generation in three countries, NRG had completed the merger with GenOn Energy and became the largest power producer in the U.S. with 47 GW of generation in the Northeast, Mid-Atlantic, Texas, and California. The new merged company expects to save $300 million in annual savings.

NRG closed at $23.45 with 1.96% gain on Monday. The volume of 22.93M is 4.82x of 30 day average volume of 4.76M. The MACD (12, 26, 9) indicator had been showing a bullish sign since November 27 and the MACD difference diverged today (Monday). NRG is currently trading above its 50-day MA of $21.66 and 200-day MA of $18.67. On Monday, NRG also closed above $23.37, its R2 pivot point, as seen from the chart below. The momentum indicator, RSI (14), is in overbought territory of 80.29. NRG is very bullish in the short-term.

(click to enlarge)

Source: StockCharts.com

The most active call was December 21, 2012 call at the strike price of $24.00 with a volume of 50,174 and an open interest of 26,117. The implied volatility is 29.8, and the chance of breakeven is 20.33. The historical volatility for NRG is 11.46 for 1 month, 20.00 for 3 months, and 28.65 for 1 year.

Abercrombie & Fitch Co.

ANF is a specialty retailer of casual apparel for men, women and kids. The company operates stores and direct-to-consumer operations under the Abercrombie & Fitch, Abercrombie kids, and Hollister brands. As of August, 2012, ANF operates 1055 locations.

On December 17, 2012, Cowen reaffirmed the outperform rating on ANF. On December 11, 2012, analysts at Piper Jaffray raised their price target on ANF from $46.00 to $52.00 with an overweight rating. On the same date, Goldman Sachs resumed coverage on ANF with a "neutral" rating and $54 price target. A Goldman analyst commented,

Our near-term tactical bias is constructive, as we see healthy margin upside from cotton deflation, new store mix as more European stores are opened, and good merchandise positioning into holiday. Longer term our view is less certain given some questions on strategic initiatives and the impact to brand in both the U.S. and Europe.

ANF released its Q3, 2012 earnings on November 14 with an EPS of $0.87, beating the consensus estimate of $0.59 by $0.28. The company had revenue of $1.17 for the quarter, comparing to the estimate of $1.11 billion. Analysts expect ANF to post $2.96 EPS for the current fiscal year.

ANF closed at $47.17 with 0.83% gain on Monday. ANF had been trading in the range of $28.64-$54.10 in the past 52 weeks. ANF is currently trading above its 50-day MA of $38.08 and 200-day MA of $38.94. The MACD (12, 26, 9) is showing a bearish sign since December 11 and the MACD difference continued to diverge. The momentum indicator, RSI (14), is still in overbought territory at 73.42, as seen from the chart below.

(click to enlarge)

Source: StockCharts.com

The most active call was January 18, 2013 call at the strike price of $50.00 with a volume of 18,104 and an open interest of 13,713. The implied volatility is 38.0, and the chance of breakeven is 22.55. The historical volatility for ANF is 29.50 for 1 month, 68.02 for 3 months, and 54.61 for 1 year.

Note: All numbers/prices are quoted from the closing of December 17, 2012 with the data provided from Barron's, MorningStar, Schaeffer's Investment Research, Inc., Google Finance, and Yahoo Finance. Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

Source: Top 3 Stocks With Unusual Call Activities On Monday