Conn's has fallen hard, and one investor is hoping for a
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 13,000 October 40 calls for an average premium of
$3.575. An equal number of January 50 calls were sold at the same
time for $2.10, resulting in a cost of $1.475. Volume was more than
60 times open interest at both strikes, indicating that new
positions were implemented.
The spread is unusual because the investor sold longer-dated calls
than those that were purchased, which could result in a highly
dangerous "naked short." But it's likely that he or she
in the electronics retailer and is using the options to make more
money from a rebound.
The trader will enjoy significant leverage over $41.48 while also
locking in an exit price of $50 on the stock. That will lower the
break-even point and help salvage what is probably a losing bet
following a big selloff. (See our
section for more on managing positions with options.)
CONN rose 2.56 percent to $33.31 but has lost more than half its
value this year. Much of that drop came last month after management
lowered guidance because of delinquencies on consumer loans.
The next earnings report is scheduled for Thursday, March 27.
Total option volume was 16 times greater than average in the
session, according to the Heat Seeker. Calls outnumbered puts by 17
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.
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