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 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
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)