One investor apparently thinks that Tempur-Pedic has run out of
optionMONSTER's Depth Charge tracking program detected the purchase
of about 7,000 February 33 puts for $2.30 and the sale of a
matching number of February 34 calls for $2.10. Volume was more
than 100 times open interest at each strike, indicating that new
positions were initiated.
Known as a
, the trade cost $0.20 and will make money from the high-tech
mattress company losing value. It essentially locks in a minimum
selling price of $32.80 and a maximum selling price of $33.80.
Investors often use this strategy because it can be easier than
unloading shares and because it won't take effect if the stock
remains range-bound. In this case, the range is between $33 and
Alternatively, yesterday's trade could be the work of a speculative
bear who is buying a cheap way to leverage a drop. That would
result in a naked short position if TPX goes over $34. (See our
section for more ways to make directional bets without trading
TPX rose 0.03 percent to $33.52 yesterday. The stock has lost more
than half its value since last April, gapping lower after several
successive earnings reports as competitors continued to take away
market share. It has been trying to rebound since mid-November,
which could be leading some traders to believe that it's vulnerable
to rolling over.
Total option volume was 25 times greater than average in the
session, according to the Depth Charge.
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