Fortress Investment has gone nowhere for years, and now the
bulls expect a rally.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of about 5,000 January 3 calls for $0.80 and $0.85. Volume was more
than 4 times interest at the strike.
lock in the price investors must pay to buy shares in the
beaten-down money manager, which focuses on private-equity and
hedge-fund strategies. If FIG rallies, the calls will generate
significant leverage because they are
in the money
and have a
of about 0.80. That means they will appreciate $0.80 for every $1
that the underlying stock moves. (See our
FIG closed Friday at $3.76, up 3.87 percent. If it climbs 33
percent to $5, those calls will more than double in value. See our
Education Section for more.
Sentiment has been extremely negative toward financials since last
summer, when a debt-showdown in Washington and fiscal chaos in
Europe unleashed a wave of panic toward the sector. As a small
company that doesn't directly own real assets, FIG has been
especially sensitive to the pessimism.
In the last few weeks, however, bad news such as the Libor-fixing
scandal has taken less of a toll on the industry and investors have
started focusing on
. They got a taste of that improvement on Friday when JPMorgan
Chase and Wells Fargo rallied on robust loan growth.
If the mood continues to improve toward financials, a low-quality
name such as FIG will probably outperform the broader sector and
those calls will provide an extra degree of leverage. Some
investors may also use options rather than shares because the
company is organized as an LLC, which can generate troublesome K-1
Overall option volume in FIG was 51 times greater than average in
the session, with calls outnumbering puts by more than 400 to
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