Traders are looking for a pop when Headwaters reports results
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 1,000 November 9 calls for $0.28 and the sale of an
equal number of November 8 puts for $0.13. Volume exceeded open
interest at both strikes, indicating that new positions were
locks in the price where shares can be purchased in the maker of
building products, while
generates income but creates an obligation to get long shares if
the stock falls. Combining the two strategies is highly bullish,
resulting in a low-cost bet to the upside.
The trader paid just $0.15 to open the position and will earn huge
profits on a move toward $9. But he or she will face big losses if
shares drop below $8. (See our
section for more on the leveraging power of options.)
HW is up 3.4 percent to $8.81 in morning trading and has been
shuffling in a range for the last four months. Its earnings have
mostly trailed estimates, but the stock has managed to hold support
at $8.50, which could make today's trader comfortable selling puts
below that level.
Total option volume in the stock is 12 times greater than 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 The NASDAQ OMX Group, Inc.
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