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
, the trade is an example of a
that makes money from the
passage of time
rather than a directional move. (See our
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
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 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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