One investor is betting that Ulta Salon, Cosmetics &
Fragrance is ready to rally once again.
The beauty-products retailer exploded to an all-time high early
last month but has been drifting lower since. Yesterday it bounced
after testing a key chart level, and the bulls stepped in.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 1,500 December 100 calls for $4.10 and the sale of an
equal number of December 95 puts for $4.65. Volume was more than
triple open interest at both strikes.
The trader collected a credit of $0.55 and can now earn unlimited
profits if ULTA rallies in the next two months. He or she also
faces downside risk, but the position differs from simply owning
stock because it will track the share price less closely as time
passes and expire worthless if ULTA remains between $95 and $100.
ULTA rose 2.83 percent yesterday to close at $98 even. While it's
up 51 percent so far in 2012, the stock is down 3 percent in the
last month and is bouncing around the same $92-$96 area that was
resistance earlier in the year and is the location of the 100-day
moving average. That could be leading some investors to believe
that it's ready to make new highs.
The bullish trade pushed total option volume in the name to 24
times greater than average yesterday, according to the Heat Seeker.
Ulta's next earnings report is scheduled for Nov. 29.
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