How bulls are playing

By David Russell,

Shutterstock photo

One investor is hoping for redemption when reports earnings later this week.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 5,000 February 45 calls for $1.03 and the sale of 10,000 February 49 calls for $0.37. That translates to a cost of $0.29.

The investor now stands to collect $4, or 1,279 percent, if the Chinese online travel agency closes at $49 on expiration. Above that level the trader is on the hook to sell shares, so it's likely that he or she is looking to exit a position in the stock.  

The trader may have purchased CTRP at some point in the last four months when it was higher, and it is now below their entry price. Yesterday's trade, known as a ratio spread , makes extra profit from a rebound and lowers their breakeven level. (See our Education section for other portfolio-management techniques.)

CTRP rose 3.09 percent to $40.72 yesterday and announces quarterly results tomorrow afternoon. It tripled in value between last April and October but then rolled over and erased about half that move. The shares have also been holding support around the same $37 area that's been resistance in the past, which is potentially bullish.

Overall option volume was quadruple the daily average in the session, with calls accounting for a bullish 78 percent of the total.

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: CTRP

More from optionMONSTER




Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by