Tempur-Pedic International ripped to a new all-time high on
Friday, and one investor exploited the move to make a quick buck.
optionMONSTER's tracking systems detected the sale of more than
4,600 January 41 puts for $0.05 to $0.30 against open interest of
909 contracts. Total option volume in the mattress company was
about 11 times greater than average in the session.
TPX would end the session with an 11 percent gain at $43.65 after
fourth-quarter results were much better than expected and
management forecast a strong 2011. The company cited improving
demand in the U.S. and acceptance of its new Cloud mattresses.
The put selling is an example of how traders can turn time and
volatility into money. On one hand, they exploited the fact that
the options would expire at the close of trading. On the other
hand, they took advantage of a sharp move in the stock price, which
increased demand for protection from investors buying the shares.
(See our Education section)
The result of the trades was that they collected about $14,700 in
premium and have no additional exposure to the name. The main risk
they faced at the time of writing the puts was that TPX would end
the session below $41.
(Chart courtesy of tradeMONSTER)
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