Deckers Outdoor reports earnings tonight, and traders are
looking for a quick move.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 2,000 Weekly 60 calls expiring tomorrow for $2.05. An equal
number of December 67.50 calls was sold at the same time for $1.25.
Volume was more than twice the previous open interest at each
strike, indicating that new positions were initiated.
Known as a
, the trade is designed to time a move in the stock price. If DECK
rallies above $60 by tomorrow's close, the investor will be
required to buy shares. He or she will then have a
against the December 67.50s. (See our
The benefit of the strategy is that it offers exposure to a rally
at a cost of just $0.80, with potential profit of $6.67. If the
footwear retailer drops, the trader will be naked short calls, but
those December contracts will then also be cheaper to buy back.
DECK is down 0.38 percent to $57.62 in midday trading. It enjoyed a
huge rally between 2009 and late 2011 but then lost 80 percent of
its value in the next 12 months. The stock rebounded sharply in the
last year and is now trying to hold support at its 100-day moving
Total option volume is slightly above average in the name, with
calls outnumbering puts by 8 to 1.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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