One investor expects a rally from Legg Mason, even if today's
earnings report disappoints.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of about 2,000 May 31 calls for $0.50. Volume was almost
14 times the open interest in the strike at the beginning of the
day, so this is clearly fresh buying.
lock in a $31 entry price on the mutual-fund operator for the next
3-1/2 months, no matter how high the stock might go. That could
result in some nice leverage in the event of a rally, but the
contracts will expire worthless if the shares don't move.
LM fell 0.32 percent to $27.65 yesterday. It barely moved for years
after the 2008 market crash but has started working its way higher
in the last two months. Like many companies in the financial
sector, it trades at a steep discount to book value.
By choosing May contracts rather than the near-term February
options, the investor is expressing a belief that the stock might
not rally immediately after this morning's quarterly report. But he
or she does apparently believe that it will continue climbing in
the longer term, regardless of the news. (See our
section for more on how options can be used to manage trades.)
Calls outnumbered puts by a bullish 6-to-1 ratio in yesterday's
session, according to the Heat Seeker.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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