One investor apparently thinks that Focus Media is getting ready
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 4,000 April 26 calls for $0.75 and the sale of an equal
number of December 22 puts for $0.35. Volume exceeded open interest
at both strikes, indicating that new positions were initiated.
The trade is bullish and results in double-long exposure to the
Chinese media company, which owns digital advertising screens
across the mainland. If FMCN rallies, the
will lose value while the
will appreciate. The opposite will happen to the downside. (See our
The unusual aspect of this strategy is that the investor bought
calls that are longer-dated than the puts sold. That reduces their
downside risk but also increased the cost because shorter-dated
contracts have less time value. The trader paid $0.40 to open the
FMCN is down 2.46 percent to $23.81 in afternoon trading and has
been grinding in a range since the summer. The stock gapped higher
on Aug. 13 after Focus Media's CEO offered to take the company
private for $27 a share.
Shares have been consolidating above their 200-day moving average
since then, making higher lows in the last two months. That could
be leading some investors to believe that it's getting ready to
Total option volume is almost twice the daily average so far in the
session, according to the Heat Seeker.
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