Tiger Woods' Comeback Lures Callaway Golf Option Bulls

ELY call volume is running at four times the norm today

The shares of Callaway Golf Co (NYSE:ELY) are higher this afternoon, after Tiger Woods won his first major golf title in more than a decade. What's more, options traders are speculating on even more short-term upside for ELY following the positive attention from the Masters Tournament.

Callaway stock was last seen 1.5% higher at $16.79, after earlier popping as high as $17.22. The equity has been in a channel of higher highs and lows since bottoming at $14.44 on Dec. 24, but today is set to take out its 100-day moving average for the first time since November. Still, just overhead lies the $18-$19 neighborhood, which hasn't been defeated since a late-November bear gap, and could emerge as a speed bump for ELY.

At last check, ELY has seen nearly 1,200 call options cross the tape -- four times the average intraday volume. That's compared to just five put options traded thus far. Call volume is now pacing for the 97th percentile of its annual range.

Most active are the April and May 17 calls. Buyers of the front-month calls expect ELY shares to rally north of $17 before the close on Thursday, April 18, when the options expire. Buyers of the May-dated calls expect the same rally, but are giving ELY more time for their prediction to pan out, as the options won't expire until Friday, May 17. This also encompasses Callaway's next earnings release on May 9.

Today's appetite for bullish bets just echoes the recent trend seen on the major options exchanges. Specifically, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 42 ELY calls for every put in the past two weeks. This ratio registers in the 78th percentile of its annual range, pointing to a healthier-than-usual appetite for long calls over puts of late.

However, some of the recent call buying -- particularly at out-of-the-money strikes -- could be attributable to shorts seeking an options hedge in the event of an ELY pop higher. Short interest represents 8.5% of the equity's total available float, or about two weeks' worth of pent-up buying demand, at Callaway Golf's average pace of trading.