Trade sees no going back for Masco

By David Russell,

Shutterstock photo

Masco has started to rally, and one big investor thinks there is no going back.

optionMONSTER's tracking systems detected the sale of 5,250 January 2012 10 puts for $0.90 against open interest of just 716 contracts. The trade pushed total options volume in the maker of housing-related items to more than 50 times greater than average.

MAS MAS rose 0.58 percent to $13.79 yesterday and is up 26 percent since the beginning of December. The stock has been the frequent target of call buying as investors bet that an improving economy will increase demand for its products, which include Behr paint, KraftMaid cabinets, and Bristan faucets.

Despite the bullishness, the company hasn't yet provided any direct evidence that business is improving. Earnings and revenue both missed forecasts the last time it issued results on Oct. 26. The next release date hasn't been announced yet, but it will probably occur around Feb. 10, based on the timing last year.

The put selling reflects a belief that MAS has established its lows for at least the next year. The investor selected the same $10 level where the stock bottomed in August, which probably gave them confidence it will hold at least that level.

A block of 2,700 January 2012 12.50 calls was purchased at about the same time for $3, so the two transactions were probably related. If they were, it was a leveraged bullish strategy that used the premium from the short puts to finance owning the upside calls.

The activity came one day after our Heat Seeker tracking system detected noteworthy buying in the April 13 calls, which also reflects bullish sentiment in the stock.

(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 Nasdaq, Inc.

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

This article appears in: Investing Options
Referenced Stocks: MAS

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