Harman draws bullish pre-earnings play

By David Russell,

Shutterstock photo

One investor wants to own Harman International before the audio company reports earnings Friday morning.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 1,000 November 45 calls for $0.94 and the sale of a similar number November 42.50 puts for about $1.70. The transaction resulted in a credit of $0.76 and is very similar to owning shares: If HAR rallies, the calls they own will appreciate and the puts they sold short will lose value, and the opposite will be true to the downside.

Unlike owning shares, however, the entire position will expire worthless if the stock closes between $42.50 and $45 on expiration 2-1/2 weeks from now. (See our Education Section.)

HAR is down 0.69 percent to $41.85 this afternoon and has been swinging in a range for the last three years. The company had reported a string of positive earnings reports as it gains market share in the automotive market, but lowered its guidance in August because of the weak euro.

The situation in Europe has stabilized since then, which could make some investors more optimistic toward Friday's report and help explain today's activity.

Overall option volume is quadruple the daily average so far today, according to the Heat Seeker.

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

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

This article appears in: Investing Options
Referenced Stocks: HAR

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