Bulls bet Dr Pepper will bubble up

By
A A A

Dr Pepper Snapple Group has been grinding sideways for 10 months, but one investor thinks it's ready to rally once again.

optionMONSTER's Heat Seeker tracking system detected the purchase of more than 7,500 February 40 calls, first for $0.08. The premiums then climbed, and most of the contracts priced for $0.15. Volume was more than twice open interest in the strike.

DPS rose 0.46 percent to $35.18 on Friday. The soft drink maker tripled between March 2009 and March 2010, but has been consolidating its gains since.

DPS During that time, it has been making successively higher lows. More recently it's been making lower highs as well, resulting in a "wedge" chart pattern. Some traders may expect DPS to make a sharp movement if it breaks free of the wedge.

Judging by Friday's call action, they expect a the longer-term uptrend to continue and for the stock to rally. It needs to climb at least 14 percent by expiration for their position to turn a profit, though the contracts will appreciate if the shares make a quick move in the next one or two weeks. (See our Education section)

The timing of the trade is interesting because the options will probably expire before the company issues fourth-quarter earnings. The company hasn't announced the date of the report, but last year it came out on Feb. 25. If they follow a similar schedule this year, it would fall one week after expiration.

DPS's last earnings report on Oct. 27 was better than expected, but management lowered its sales-growth forecast. The company's brands include A&W root beer, Mott's apple juice, Yoo-hoo chocolate drink, and Nantucket Nectar juices.

Overall option volume in the name was 33 times greater than average on Friday, with calls outnumbering puts by 177 to 1.

(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.

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


This article appears in: Investing , Options

Referenced Stocks: DPS

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Stocks

Referenced

100%

Most Active by Volume

100,376,898
  • $17.62 ▲ 0.51%
83,231,837
  • $25.62 ▲ 1.91%
75,739,329
  • $111.78 ▼ 0.77%
65,297,937
  • $36.37 ▼ 1.76%
59,053,093
  • $47.66 ▲ 0.29%
53,482,350
  • $2.59 ▼ 0.38%
51,504,284
  • $7.34 ▲ 2.37%
51,434,656
  • $8.14 ▲ 6.96%
As of 12/19/2014, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com