Legg Mason refuses to break below its 200-day moving average,
and now on trader is looking for a rally with a highly leveraged
optionMONSTER's Heat Seeker tracking system detected the
purchase of 7,500 June 32 calls for $0.30 and the sale of a
matching number of June 27 puts for $0.25, resulting in a net debit
of $0.05. Volume was more than triple open interest in both
LM rose 1.26 percent to $30.47 yesterday. The mutual-fund operator
is up 9 percent in the last month, compared with a 5 percent loss
for the S&P 500 during the same period and even bigger declines
for rivals such as Franklin Resources, T. Rowe Price, and Waddell
LM, which has typically lagged its peers, stunned investors with
better-than-expected revenue and earnings on May 10. It also
announced plans to restructure, expand overseas and buy back
shares. The stock gapped higher on the news before getting knocked
down along with the rest of the market.
Since then, it has clung to the key $30 level and managed to stay
above the key 200-day moving average. Some chart watchers may
consider patterns as those bullish signals.
Yesterday's option trade, known as a bullish combination, is an
extremely leveraged way to play for a rally and will double the
investor's money for every $0.05 that LM trades over $32.05. It
will also generate losses if the stock falls below $27.
The transaction pushed overall options volume in the stock to more
than three times greater than average.
(Chart courtesy of tradeMONSTER)
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