One investor is betting big on Harman International's quarterly
report tomorrow morning.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of purchase of 2,500 March 55 calls for $0.65 and the sale of an
equal number of March 45 puts for about $0.65. There was almost no
previous open interest in either contract, indicating that new
positions were initiated.
If the maker of audio systems rallies, the
will appreciate and the
puts sold short
will lose value, while the opposite will happen to the downside.
That makes the trade similar to owning shares, but it will track
the stock price less closely as time passes.
The benefit of the trade is that it cost essentially nothing to
open, giving the investor a free ticket to a big move higher. But
if it drops, he or she could be forced to buy shares for an
effective price of $44.35 once the creidt from the put sale is
included. (See the discussion of
section for more.)
HAR rose 0.80 percent to $50.10 yesterday. The stock has hovered at
$50 for the last three weeks, a level where it has peaked several
times since 2010, so some traders may expect a big rally if that
resistance is broken.
Total option volume was 18 times greater than average in the
session, according to the Heat Seeker.
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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