Bulls betting Coach will come back

By David Russell,

Shutterstock photo

Retailers and related stocks continue to fight back from major selloffs, and yesterday the bulls were shopping at Coach.

optionMONSTER's Heat Seeker syste detected unusual activity in the afternoon, starting with the purchase of more than 1,800 Weekly 38.50 calls expiring on Sept. 26 for $0.25. A few minutes later they turned to the February 41s in much larger numbers, snapping up more than 10,000 of those contracts for $1.20 and $1.25.

Volume was more than 28 times open interest at both strikes, which indicates new money was put to work. The unusual activity was cited by optionMONSTER co-founder Jon "DRJ" Najarian on CNBC's " Fast Money " program after the close.

Long calls lock in the price where investors can buy a stock, letting them position for gains at limited cost. They can also generate significant leverage if a rally unfolds, but the contracts can lose value on a pullback. (See our Education section)

COH rose 2.05 percent to $37.27 yesterday. The luxury-accessories retailer lost more than 30 percent of its value early this year, cratering along with other consumer-discretionary names after a poor holiday season. But the stock rebounded after a strong quarterly report on Aug. 5 and is now back above its 50-day moving average.

Total option volume in Coach was 6 times greater than average in the session, with calls outnumbering puts by a bullish 8-to-1 ratio.

Disclosure: Najarian is long COH.

(A version of this post appeared on InsideOptions Pro yesterday.)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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

This article appears in: Investing Options
Referenced Stocks: COH

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