Bulls shop at Dollar General again

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Dollar General has retreated after a big move, and now the bulls are back.

optionMONSTER's Heat Seeker monitoring program yesterday detected the purchase of 62,000 November 57.50 calls for $2.75 and the sale of an matching number of November 62.50 calls for $1.30. Volume was below open interest at the higher strike, so there are two possible explanations for the activity.

If both halves of the trade are new, the strategy was a bullish call spread with the potential to earn 245 percent from the stock rallying to $62.50 or higher on expiration. Alternatively, the investor may have previously owned the 62.50 long calls and rolled the position lower after the discount retailer fell. Either way, he or she paid $1.45 and is looking for a rebound by late autumn. (See our Education section)

DG fell 0.22 percent to $55.33 yesterday. It surged more than 20 percent between May 30 and June 9, fueled by a strong earnings report and news that billionaire investor Carl Icahn had amassed a large stake in the company. Almost all those gains have disappeared since.

Total option volume in the name was 12 times greater than average in the session, with calls outnumbering puts by a bullish 33-to-1 ratio.

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


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