The bulls are sticking with Zimmer Holdings after the
medical-device company bounced hard last week.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 1,500 January 95 calls for $0.70 and the sale of an
equal number of January 80 puts for $0.60. Volume was more than
twice the previous open interest at each strike, indicating that
new positions were initiated.
The investor now controls the equivalent of 42,000 ZMH shares for a
cost of just $15,000. Using common equity to get that much exposure
would have cost about $3.7 million. The trader now stands to
benefit from huge leverage if the stock rallies because the
will gain in value while the
puts sold short
will dwindle. The opposite will happen to the downside, so the
trader could also see big losses from a steep drop. (See our
ZMH was up fractionally yesterday to close at $88.94. It gapped
down to $80.55 on Oct. 24 after lowering earnings guidance but
quickly rebounded and is less than $1 from last month's all-time
Given that it bounced on heavy volume above $80, the investor might
think that there is strong support at this level and that it's safe
to sell puts. This way the trader won't miss a breakout while
paying almost nothing upfront.
Another large trade hit late in yesterday's session as an investor
bought the June 90 calls and sold shares, looking for increased
volatility in the name.
Total option volume was 19 times greater than aver, according to
the Heat Seeker.
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