Bears calling a top in Leggett & Platt

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Leggett & Platt surged its highest level in more than three years yesterday, and traders apparently think that it's reached a ceiling.

LEG Chart optionMONSTER's tracking systems detected the sale of 4,895 September 25 calls for $1.20 to $1.25 against open interest of 148 contracts. The activity pushed overall options volume in the industrial stock to nine times greater than average.

LEG rose 1.56 percent to $24.77 yesterday and is up 36 percent in the last three months. The company, which makes engineered products such as bed springs, reported better-than-expected sales and earnings on April 21 and raised its full-year guidance.

The shares have now climbed to the top of a bearish gap that occurred on Oct. 20, 2006, which could cause some traders to expect resistance. LEG's all-time high was $30.68 in December 2004.

Writing calls reflects a belief the shares will remain below $25 through expiration. Given the credit earned, the strategy will be profitable as long as they remain below about $26.20.

The call selling accounted for 98 percent of the options activity in LEG yesterday.

(Chart courtesy of tradeMONSTER)



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

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This article appears in: Investing , Options

Referenced Stocks: LEG

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