DreamWorks Animation SKG reports earnings next week, and one
bull wants a front-row seat.
optionMONSTER's Heat Seeker Heat Seeker program detected the
purchase of nearly 3,300 March 17.50 calls for $0.60 to $0.75
against open interest of just 1,553 contracts. Almost all the
volume occurred in about 5 minutes on Friday, indicating it was a
work of a single large investor.
The trader now has the right to buy shares in the movie studio for
$17.50 in the next four weeks, no matter how high they may trade.
That could result in some
if the stock rallies, but the investor will lose his or her entire
investment if it doesn't move.
The advantage of the strategy is that it manages risk, delivering
long exposure at less than 1/20 of the share price. (See our
section for more on how trading options can be safer than buying
DWA rose 2.66 percent to $17.39 on Friday but has been struggling
amid disappointing box-office results. The stock is down about 7
percent in the last year, while the broader market and other media
companies have enjoyed doubled-digit gains.
The call buyer apparently expects news to get better when earnings
are released after the bell a week from today on Feb. 26. The
trader may be hopeful of cost reductions, especially after the Wall
Street Journal reported earlier in the month that as many as 500
jobs may be cut at the studio
Total option volume was 14 times greater than average in the
session, according to the Heat Seeker. Calls outnumbered puts by a
bullish 42-to-1 ratio.
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