One big investor apparently thinks that iStar Financial is ready
to catch fire.
optionMONSTER's Heat Seeker system detected the purchase of more
than 2,100 January 7.50 calls against previous open interest of
just 721 contracts. Premiums shot up from $1.35 to $1.50 as the
lock in the price that the trader must pay to buy the stock in the
next 10 months. They will provide significant leverage to a rally,
doubling or tripling from a relatively small move in the share
price. But if the stock fails to rise, those options will end up
worthless. (See our
iStar, a highly leveraged and heavily shorted commercial
real-estate lender, rose 2.4 percent to $7.25 yesterday. It's been
consolidating around that level since late January, when it
reported better-than-expected earnings as bad loans declined.
Credit conditions have also been improving for commercial
mortgages, with bankers expecting fewer defaults and easier lending
standards. (See our this week's
What's the Trade?
column for more)
Given that backdrop, high short interest, and the relative
cheapness of the stock, some investors may think that iStar is due
for a rally--especially because it trades at less than half its
Overall option volume in the name yesterday was quadruple its daily
average, with not a single put changing hands in the session.
(A version of this post appeared on
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.