Long-term bet on International Paper

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International Paper is rewarding shareholders, and one investor is in for the long haul.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 9,800 January 2015 50 calls for $5.50. Equal-sized blocks were sold at the same time in the January 40 puts for $3.25 and the January 60 calls for $2.28. Volume was well above open interest at all three strikes, indicating that new positions were initiated.

The investor paid essentially nothing to implement the trade, which combines a vertical-spread strategy with short puts . They now stand to collect $10 if the packaging stock closes at $60 on expiration 16 months from now, with the risk of losing money on a drop below $40. (See our Education section)

IP is down fractionally at $49.12 in afternoon trading but is up 41 percent in the last year. It's been ripping higher as price increases fatten profit margins despite top-line weakness. Management boosted its dividend and announced a $1.50 billion share buyback earlier today.

Shares have been consolidating above $50 for most of 2013. Their all-time around $60 was achieved in early 2000, and today's bullish three-way strategy is apparently targeting a return to that level.

Total option volume is 8 times greater than average so far in the session, according to the Heat Seeker.



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: IP

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