Magna spread looks for breakout

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Magna International is testing its highs, and one big investor is looking for a breakout.


optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 March 90 calls for $1.90 and the sale of an equal number of March 95 calls for $0.50. Volume was more than 14 times open interest in each strike, indicating that new positions were initiated.

The investor stands to collect $5 if the auto-parts maker closes at $95 or higher by expiration in mid-March. That would be a profit of 271 percent based on the initial $1.40 outlay. (See our Education section for more on vertical spreads .)

MGA rose 1.17 percent to $87.85 on Friday and is up 65 percent in the last year. The shares traded within a penny of their all-time high from Nov. 6, when they surged on a strong earnings report. They pulled back as far as $76 in mid-December before rebounding.

The company hasn't announced the date for its next quarterly release, but last year's calendar suggests that it will occur in early March. So that spread would profit from a strong set of numbers.

Overall option volume was 83 times greater than average in the session, according to the Heat Seeker, with calls accounting for almost 99 percent of the total.



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: MGA

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