H&R Block has rallied more than 70 percent from a long-term
low in October, and one big investor apparently thinks that it
might surrender some of those gains.
optionMONSTER's Depth Charge tracking system detected the purchase
of 10,100 January 15 puts for $1.49 and the sale of an equal number
of January 10 puts for $0.35, resulting in a net cost of $1.14.
This bearish put spread will earn a maximum profit of 338 percent
if the tax-preparation stock closes at or below $10 on expiration.
(See our Education section)
HRB rose 4 percent to $17.41 on Friday and has been moving straight
up all year. It had trended lower since 2005 as customers shifted
to software such as Intuit's TurboTax. The losses accelerated
throughout most of last year, when it hit a decade low of $10.13.
Since then it's been rallying higher amid bullish call buying,
fueled first by short covering and then as the business environment
improved. HRB's last earnings report on March 9 beat expectations
as customer traffic increased for the first time in years.
Friday's bearish trade could be the work of an investor who owns
the stock and wants to hedge against a drop or of a speculative
bear looking for a reversal lower.
The transaction pushed total options volume in the name to more
than seven times the daily average, with puts accounting for almost
four-fifths of the activity.
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