Fossil draws cautious strategy


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Fossil is back near record highs, and investors are nervous about a drop.

optionMONSTER's Depth Charge monitoring system detected the purchase of 2,000 December 125 puts for $4.20. Equal-sized blocks were sold at the same time in the December 115 puts for $1.20 and the December 135 calls for $1.25. Volume was more than 5 times open interest at all three strikes, indicating that new positions were initiated.

The investor probably owns shares in the watch maker and is using the options to protect against a pullback. He or she will collect $10 if FOSL drops to $10 and must also unload the stock if it rallies past $135--roughly the same level where it peaked earlier in the month. The trader paid $1.75 to implement the strategy, which combines elements of a covered call with a vertical spread . (See our Education section)

FOSL fell 0.97 percent to $126.08 yesterday but has doubled since July 2012. It recently peaked near its all-time high around $139, which could make some traders want to take profits. The last quarterly report on Nov. 5 beat expectations, but guidance lagged estimates.

The bearish trade accounted for nine-tenths of yesterday's option volume in the name, according to the Depth Charge.

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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