Bulls bet Goodyear will keep rolling

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A large trade is looking for Goodyear Tire & Rubber to keep rolling higher.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 10,000 July 28 calls for $1.85 and the sale of an equal number of April 26 calls for $1.85. Volume was below previous open interest in the nearer-dated contracts, which indicates that an existing position was closed and moved forward, keeping the investor in the trade for another three months.

Long calls fix the price where a stock can be purchased, letting investors cheaply position for a rally with potentially significant leverage and less capital at risk. Traders often buy the options instead of shares, then rotate capital from one option contract to another as time progresses.

Today's adjustment cost nothing while providing an additional three months for the tire maker to rally. The move also reduced the position's delta , dulling the pain of a near-term pullback. (See our Education section)

GT is down 0.87 percent to $27.46 in afternoon trading but is up 15 percent so far this year. The company has consistently beaten earnings estimates on strong margins and is now back to its highest levels since early 2008.

Total option volume in the name is quadruple its daily average, with calls outnumbering puts by more than 60 to 1.



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: GT

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