Is Tempur-Pedic ready for a siesta?

By
A A A

Tempur-Pedic is famous for its mattresses, and now one investor thinks that its stock needs to go to sleep.

optionMONSTER's tracking programs detected the sale of about 15,300 June 70 puts for $1.50 and an equal number of June 95 calls for $1.20. Volume was more than 49 times open interest at both strikes.

The investor collected a credit of $2.70, which he or she will keep as profit if TPX closes between $70 and $95 on expiration. Known as a short strangle , the trade is an example of a market-neutral strategy that makes money from the passage of time rather than a directional move. (See our Education section)

TPX fell 5.01 percent to $80.85 yesterday but is up more than 50 percent so far this year. The company has repeatedly beaten expectations amid a strong wave of demand for its space-aged bedding.

In the last few weeks, however, it's been stalling around its all-time highs, which could be leading some investors to think that it's due for a pause. Selling strangles is a common way to trade such an expectation.

The company is also scheduled to report earnings after the bell next Thursday, April 19. If it doesn't make a big move higher or lower, that will also benefit the strangle seller.

Overall option volume in TPX was 52 times greater than average in the session.



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.


This article appears in: Investing , Options

Referenced Stocks: TPX

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Tiny Homes With Big Appeal
Tiny Homes With Big Appeal          

Stocks

Referenced

50%

Most Active by Volume

270,887,127
    $93.89 unch
225,243,115
  • $40.93 ▼ 2.74%
135,900,109
  • $47.52 ▲ 1.80%
89,467,924
  • $5.35 ▼ 1.11%
85,105,358
  • $16.95 ▼ 0.53%
80,748,539
  • $39.80 ▼ 4.21%
68,491,586
  • $3.57 ▼ 1.79%
62,097,356
  • $100.96 ▼ 0.82%
As of 9/19/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com