Trade sees cushion under Tempur-Pedic


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Tempur-Pedic has been falling despite strong results, and now one investor is betting on the fundamentals.

optionMONSTER's tracking programs detected the sale of more than 2,200 October 47 puts for $3 to $3.20. Volume is more than 4 times open interest in the strike.

TPX is down 0.78 percent to $48.31 in morning trading and is back to levels last seen in March. The mattress maker's stock has been exploding higher amid strong demand for its products as it repeatedly beats estimates and raises guidance. Despite the recent weakness in the S&P 500, it's still up more than 50 percent in the last year.

Investors sell puts when they like a stock but don't want to expend capital getting long. The strategy lets them earn income from shares holding their ground or rising even modestly. Today's trade also stands to benefit from the accelerating pace of time decay as expiration approaches on Oct. 21. (See our Education section)

Overall option volume is 6 times greater than average so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: TPX

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