One investor wants to take a free ride on International Paper.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 15,000 January 45 calls for $1.83 and the sale of 60,000 January
50 calls for $0.51. Volume surpassed open interest at both strikes,
indicating that new positions were initiated.
The trader collected a credit of $315,000 and now stands to bring
in an additional $7.5 million if the packaging stock closes at $5
on expiration. Above that level he or she is effectively short 4.5
million shares, so the trader almost certainly own the stock.
It looks as if the trader bought IP when it shot over $50 in late
July after a strong earnings report. It was the highest price in
more than 13 years, leaving them trapped when sellers drove the
stock back below that level.
Today's investor is using the
to repair that trade. This way he or she stands to leverage a move
back to $50 and will exit the position if it goes to resistance.
section for more on how to turn losing trades into winners with
Alternately, the investor might have bought shares at lower prices
and simply wishes to enhance a run back toward the top.
IP is down 0.45 percent to $43.51 in afternoon trading. It flirted
with $50 twice in September but is now down 9 percent in the last
month. Earnings come out on Oct. 24.
The ratio spread is the single largest transaction to appear in the
market today. It pushed total option volume in IP to 12 times
greater than average. The Heat Seeker shows calls outnumbering puts
by a bullish 100-to-1 ratio.
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