Goodyear sees huge upside plays

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Goodyear Tire & Rubber pushed to new highs yesterday, and the options activity was extreme.

The unusual volume hit early and hit often in the company, starting with January 25 calls and the January 25.50 calls. The 25s were purchased for $0.45 and 25.50s fetched $0.25. More than 4,000 contracts traded in each during the first 30 minutes of trading.

Buyers returned in the afternoon, snapping up more than 6,000 February 26s for $0.95 to $1 and almost 8,000 January 23s for $2.25 to $2.40. Such long calls lock in the price where a stock can be purchased, letting investors cheaply leverage modest gains in the underlying price. (See our Education section)

In the largest transaction of the day, an investor bought 15,000 July 27 calls for $1.85 and sold 15,000 July 31s for $0.70. Known as a vertical spread , the strategy will leverage a $1.15 bet into a potential $4 windfall if the shares close at or above $31 on expiration.

GT rose 2.06 percent to $25.22 yesterday and is up 12 percent in the last month. The stock almost doubled between April and September, pulled back and has been climbing since early November. It's now back to levels last seen in mid-2008.

Earnings will probably be released in the first half of February based on last year's calendar, although the date hasn't yet been announced.

Total option volume was 23 times greater than average in the session, with calls outnumbering puts by a bullish 30-to-1 ratio.

(A version of this post appeared on InsideOptions Pro yesterday.)




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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: GT

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