Ann attracts leveraged bullish position

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Ann has pulled back to a potential support level, and one bull is getting long for cheap.

optionMONSTER's Heat Seeker tracking system detected the purchase of 4,000 July 29 calls for $0.55 and the sale of an equal number of July 24 puts for $0.40. Volume was more than triple open interest in both strikes.

The trade resulted in a net cost of $0.15 and will generate significant leverage if the apparel stock rallies toward or above $29 in the near term. It will also lose money to the downside and expire worthless if the shares remain between $24 and $29 by July 15.

ANN fell 0.59 percent to $26.84 in morning trading, returning to a price area where it peaked in late 2010 and consolidated again in March after gapping higher. Some chart watchers may now expect it to bounce at this level, continuing an uptrend that has been in place since the S&P 500 bottomed out more than two years ago.

The shares were most recently the target of call sellers on May 20, who looked for them to remain below about $29.50 through June expiration. ANN is in the process of opening new stores and has told investors that margins will suffer in the short term as a result.

Today's bullish trade pushed overall option volume in the name to more than twice the average amount so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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