O'Reilly Automotive has been falling hard, but yesterday's
option activity was bullish.
Our Heat Seeker monitoring program detected the purchase of 6,100
October 95 calls for $0.25 and the sale of an equal number of
October 70 puts for $0.13. Volume was more than 100 times the
existing open interest at each strike, so this was clearly new
The trade cost just $0.12 and provides exposure to a fast rally in
the auto-parts retailer. The position will expire worthless if the
stock doesn't move quickly, and the trader faces losses in the
event of a sharp drop.
The unusual performance profile results from the fact that both
far from the money
and will track movements in the share price less closely as
. (See our
section for more on the life cycle of options.)
ORLY dropped 4.80 percent to $81.53 yesterday and has lost about 16
percent of its value in the last three months. Much of that decline
came on June 27 after same-store sales missed estimates. It had
peaked over $107 in early May.
Yesterday's bullish trade was tailored to benefit from a big rally
in the stock and appears to be relatively speculative. The investor
probably thinks that it has a low probability of success but also a
modest risk of loss.
Overall option volume in the name was 23 times greater than
average, according to the Heat Seeker.
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.
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