Cooper Tire & Rubber has spent the last three months
consolidating last year's huge gains, and one investor is
positioning the rally to continue.
optionMONSTER's Heat Seeker tracking system detected a large option
trade that mimicks a long position in the tire stock. It included
the sale of 3,500 June 20 puts for $1.05 and the purchase of 7,000
June 22.50 calls for $0.65. Neither strike had any open interest
when the session began.
CTB rose 1.28 percent to $20.65 in morning trading. The shares,
which climbed about 600 percent between March 2009 and January,
have been moving sideways since then while making successively
higher lows. Some traders may interpret the price action as a
bullish "triangle" pattern and look for further gains.
The stock has been rising against significant short interest and as
money flowed back into the beaten-down auto sector. CTB reported
better-than-expected sales and profit on March 2, fueled by strong
demand, lower costs, and higher capacity utilization.
Today's options trade cost a net $0.25 per call contract purchased.
It will produce large gains if the stock rallies above $22.75,
losses below $20, and nothing between the two strikes. The strategy
is a modified version of a combination trade, which typically would
include equal numbers of calls and puts.
The transaction pushed overall options volume in CTB to 25 times
greater than average.
(Chart courtesy of tradeMONSTER)
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