Strategy bets on move in PetSmart

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PetSmart reports earnings next week, and one investor is looking for a move.

PETM optionMONSTER's tracking systems detected the purchase of 1,500 December 35 puts for $0.60 and 1,500 December 40 calls for $1, resulting in a net cost of $1.60. Volume was more than 9 times open interest in both strikes.

PETM is up 0.60 percent to $38.76 in morning trading after hitting an all-time high of $39.28 yesterday. The pet-store chain has a track record of making big moves in association with earnings reports in the last year or so, gapping higher amid bullish news on Aug. 19, March 4, and Oct. 14, 2009. The next release is scheduled for after the bell on Nov. 17.

Today's option strategy, known as a long strangle, will make money if PETM leaps above $41.60 or falls below $33.40. It's a common trade that investors implement shortly before a big news event that could caused a gap higher or lower. (See our Education section)

Overall options volume is 12 times greater than average in the stock so far today.

(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 The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: PETM



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