Shutterfly exploded higher last week, and one investor expects
the gains to continue.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 5,000 March 42.50 calls for $1.35 and the sale of 2,600
March 37.50 puts for $0.45. Volume was more than triple open
interest at both strikes.
The strategy cost $558,000 to implement and is similar to owning
shares in the photo-sharing website, with the
appreciating in value in the event of a rally and the
losing value. The opposite will happen to the downside. If SFLY
remains between $37.50 and $42.50 through expiration, the entire
position will become worthless.
SFLY is down 1.72 percent to $41.18 in morning trading but is up 62
percent in the last three months. Much of that move occurred on
Feb. 5, when quarterly results beat expectations and management
issued strong guidance. It was at least the fourth consecutive
report with earnings exceeding consensus estimates.
One unusual thing about today's strategy is that the investor
bought more calls than the number of puts he or she sold that. That
reduces their risk of loss but also increases their cost basis.
section for more on
Total option volume is quadruple the daily average so far this
morning, 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 The NASDAQ OMX Group, Inc.
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