Time played in Children's Place


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One investor expects a rally in Children's Place Retail Stores and using an unusual time strategy to get long.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 April 52.50 calls for $2.85 and the sale of an equal number of March 55 calls for $1.10. Volume surpassed previous open interest in each strike, indicating that new positions were initiated.

Selling nearer-dated calls took advantage of the higher implied volatility in the March contracts, letting the investor receive more premium to offset the cost of the April contracts they own. He or she paid a net $1.75 and will collect $2.50 if the stock closes above $55 on March expiration. But if it remains below that level, the trader will own the 52.50s outright and be able to sell more upside calls to further reduce the position's cost basis. (See our Education section)

PLCE is up 1.7 percent to $52.69 in afternoon trading and is holding support around the same $52 level where it has bounced several times in the last year. The children's apparel retailer has struggled in recent weeks along with other retailers despite a strong earnings report in November.

Total option volume is 5 times greater than average in the session, with calls outnumbering puts by 57 to 1.

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

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This article appears in: Investing , Options

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