Life Time Fitness draws bullish trade

By David Russell,

Shutterstock photo

The recent market volatility has knocked Life Time Fitness back to earth, and now one trader thinks the buyers will return.

optionMONSTER's tracking programs detected a low-cost combination trade that will profit from a rebound in the fitness-center stock while producing limited downside risk. The investor sold 3,000 June 30 puts for about $0.80 and bought an equal number of June 40 calls for $0.80. Volume was more than 18 times open interest in both strikes.

LTM Chart The trade cost almost nothing to implement. It will make money if LTM rallies above $40 by expiration and lose money below $30.  

LTM rose 2.22 percent to $34.55 Friday and is down 11 percent in the last month. The shares have been falling along with the rest of the market but had ripped higher after management forecast better-than-expected full year results on April 22, reversing weak guidance in February.

The stock has now returned to the same price range where it traded in 2008 before the stock market crashed. It also seems to have found support above the $31 level where it peaked in August. The trader may now consider that level as support, making him or her more comfortable being short the puts.

LTM is scheduled to present at the William Blair 30th Annual Growth Stock Conference on June 16, two days before the options expire.

Overall options volume in the name was 19 times greater than average in the session.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: LTM

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