Coach retreated yesterday, and one investor used the opportunity
to get long the luxury retailer.
optionMONSTER's Heat Seeker tracking system detected the purchase
of 2,000 April 75 calls for $1.95 and the sale of an equal number
of April 65 puts for $0.75. A block of 4,000 April 80 calls was
also sold for $0.50. Volume was more than 7 times open interest in
all three strikes.
The trade resulted in a cost of $0.20 and will earn a maximum
profit of 2,400 percent if COH closes at $80 on expiration. Gains
will erode above that level and turn to losses over $85. It also
stands to lose money below $65.
The strategy combines elements of a
with a bullish combination trade. (See our
COH declined 4 percent to $73.12 yesterday but is up 23 percent
since mid-December. The maker of handbags and women's accessories
has been ripping to new all-time highs, beating estimates the three
last times it issued quarterly results.
It peaked around $66 and $68 on two occasions last year, which
could be leading some chart watchers to expect that it will now
find support around that area. That could also make them confident
at the $65 strike, in addition to
Overall option volume was 5 times greater than average in the
session, according to the Heat Seeker.
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