One investor is targeting the $25 level on Fifth & Pacific
with a highly leveraged trade.
optionMONSTER's Heat Seeker monitoring system detected a huge
on the apparel stock. The trader initially bought 5,000 October 23
calls for $1.90 and sold 10,000 October 25 calls for $1.
He or she returned less than two hours later, this time snapping up
2,500 of the 23s for $1.85 and selling 5,000 of the 25s for $0.90.
Combined, that totals up to 7,500 contracts owned at the lower
strike and 15,000 sold at the higher strike. The trader collected a
credit of $37,500 in the process.
That position will expand to $1.5 million if FNP closes at $25 on
expiration. Gains will erode above that level because more calls
were sold than were bought. If done in isolation, the trade will
face losses above $27.
But there is a good chance that the investor is a long-term holder,
looking to repair a losing trade. The stock, formerly known as Liz
Claiborne, consolidated around $25 in late 2007 before crashing
along with the rest of the market.
The investor may have gotten long around $25 and now wishes to
leverage a rebound to that level. Above it, the trader will simply
relinquish their shares to cover the short calls. (See our
section for more on how big-money investors us options to manage
positions and turn losers into winners.)
FNP rose 0.09 percent to $22.60 yesterday and is up 82 percent so
far this year. Almost 23,000 contracts changed hands, compared with
fewer than 100 in an average session. Only 19 puts traded in the
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.