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The Payoff for Investing in Payday Lenders

Tickers in this article: CSH DLLR WRLD
NEW YORK (TheStreet) -- In the world of finances, the payday lending/check cashing/pawn shop industry is perhaps the most loathed by consumer protection advocates. They charge this industry preys on the people who can least afford it -- the poor.

That said, investors are learning the publicly traded companies in this sector could be worthy investments.

This week, the market will get more of an idea of how some of these finance companies are faring when three of them report their latest quarterly earnings. They are Cash America (CSH), and World Acceptance , reporting on Thursday, and DFC Global , reporting on May 1.

One of the largest companies operating in the space is Cash America, which reports on Thursday. It is expected to post earnings per share of $1.37 for the first quarter of 2013. This will be above the $1.30 it posted for the first quarter of 2012.

With a market cap of $1.3 billion, Cash America is the largest of its peers.

An interesting development occurred for this stock in the options market that indicates the bulls are expecting Cash America's earnings for the last quarter to be strong. According to optionMONSTER's Heat Seeker's monitoring program, 2,000 September 50 calls had been purchased for $1.90 to $2.10, as of Friday.

Furthermore, volume was "77 times open interest at the strike, indicating that new money was put to work on the long side," according to optionMONSTER. The total option volume was 37 times greater than average in the session, according to the Heat Seeker, with calls outnumbering puts by more than 1,000 to 1.


The Born to Sell covered call Web site notes that, in general, the more open interest there is, the better because it means there is more liquidity for the call option being traded. "More liquidity means smaller spreads between the bid and ask," according to Born to Sell.

Also interesting about how Cash America has been trading is its sharp rise since November. Between November and March, shares rose about 50%. However, now its shares are trading around levels near the 52-week high.

Could traders see this as a sign that shares are at support and ready to bounce? OptionMONSTER thinks so. I agree with the site in that this week's earnings report release could lead shares to bounce on the news.