Does Fastenal Still Have Room To Run?

Nov. 1.11 | About: Fastenal Company (FAST)

By David Russell

Fastenal (NASDAQ:FAST) exploded higher last week, and one investor wants to keep riding it higher.

optionMONSTER's tracking programs detected the sale of about 3,600 January 42.50 calls for $0.55. Some 3,000 November 37.50 calls were bought at the same time for $1.99 to $2.08, but volume was below existing open interest in that strike.

The activity is probably the work of an investor who owns shares in the industrial-supply company and has been using the options as part of a covered-call strategy. He or she had previously sold the November 37.50s to earn income, but now that FAST is above the strike price, they're buying them back and rolling to the January 42.50s.

The move cost them about $415,000, but gives them the the right to collect an additional $5 of upside on about 300,000 shares. That translates into about $1.5 million of potential gains. See our Education Section for more on covered calls.

FAST is down 0.34 percent to $38.49 in afternoon trading, but has rallied more than 15 percent from its lows earlier this month. Earnings matched estimates on Oct. 13 and revenue beat, marking its third consecutive strong report. See our new researchLAB service for more.

The stock popped to an all-time high of $39.14 on Friday, and may be getting squeezed higher because short interest was 13 percent of the float as of Oct. 14.

Overall options volume is 5 times greater than average so far today.