Bulls take the wheel on Cooper

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Cooper Tire & Rubber has spent the last three months consolidating last year's huge gains, and one investor is positioning the rally to continue.

CTB Chart 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)




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

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


This article appears in: Investing , Options

Referenced Stocks: CTB

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