DreamWorks Animation had a big movie release over the weekend,
and one trader is wagering that it will lift the stock.
"Madagascar 3: Europe's Most Wanted" cost $145 million to produce
and was released on Friday. The options activity focused on the
July 20 calls, bought for $0.28 to $0.30, and the December 12.50
puts, which sold for $0.30 to $0.35.
The position produced a credit about $0.05 and stands to
benefit from a rally
over the next six weeks, but the trader is potentially on the hook
for losses through late in the year. Some 2,500 contracts changed
hands at each strike, more than triple previous open interest in
DWA rose 0.06 percent to $18.01 on Friday and has been basing out
above $16 since October. The strategy is specially designed to time
a near-term break above its recent range and takes advantage of the
greater time value
in the December options to finance the upside bet.
The heavily shorted stock has never traded below $16, which could
have given the trader confidence
at $12.50. (See our
Overall option volume was 19 times greater than average in the
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