CareFusion reports earnings next week, and traders are hoping
for a big rally.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 1,700 September 45 calls for $1.90 and the sale of an
equal number of September 39 puts for $0.25. Volume exceeded the
previous open interest in each strike, which indicates that this is
The strategy cost $1.65 to implement and is similar to owning
shares in the medical-products company. The position will generate
significant leverage in a rally, but the trader would be on the
hook to buy shares if they fall below $39. (See our
section for more on
CFN fell 0.62 percent to $44.73 yesterday. It almost doubled
between late 2012 and early this year, then pulled back to its
200-day moving average in April before surging to new highs by
early July. The next set of quarterly results is due after the
closing bell on Thursday, Aug. 7.
It's noteworthy that the investor sold puts at the $39 strike
because it's roughly the same level where CFN peaked one year ago.
That could make some chart watchers expect it to provide support if
the stock declines instead of rallying as hoped.
Overall option volume was 10 times greater than average yesterday,
with that bullish combination trade accounting for more than 90
percent of the total.
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