Someone is betting that International Paper's big rally isn't
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 20,000 July 45 calls for $1.41 and the sale of an equal number
of July 50 calls for $0.31. Volume was more than 70 times open
interest at both strikes.
Known as a
bullish call spread
, the strategy will control a push from $45 to $50. It cost $1.10
to own that $5 move, translating to a profit of 355 percent if the
paper and packaging company closes at $50 or higher on expiration.
IP rose 0.28 percent to $42.51 on Friday and is up 27 percent in
the last six months. The shares are now hovering around the
same level where they peaked in 2004, which could be making some
traders nervous about a pullback. At the same time, they may be
hoping that the rally will continue.
Call spreads are an ideal response to that situation because they
risk little capital but let the investor profit from a move in the
intended direction. (See our
section for other ideas on how to manage positions and limit
IP is also scheduled report fourth-quarter results tomorrow
Total option volume was 16 times greater than average in the
session. Calls outnumbered puts by a bullish 10-to-1 ratio.
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.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.