Focus Media fell hard yesterday, and one investor expects more
volatility going forward.
optionMONSTER's tracking systems detected the purchase of 2,000
September 31 puts for $1.60 and 2,000 September 34 calls for $1.45,
resulting in a cost of $3.05. Known as a strangle, the trade will
profit from shares making a sharp move higher or lower. (See our
FMCN closed at $31.55 yesterday, down 5.31 percent. The owner of
digital billboards in China rallied 60 percent in the first four
months of the year, only to sell off in May and June along with
many other Chinese stocks. It then bounced at its 200-day moving
average but now seems to be making a lower high around $34.
The weakness comes despite the last financial report on May 24
showing a swing to profitability and 51 percent revenue growth from
a year earlier. The next release hasn't been scheduled yet, but it
will likely be later this month.
Option prices often increase before earnings as implied volatility
rises, a trend that yesterday's strangle buyer may hope to exploit.
The trade pushed FMCN's total option volume to 6 times greater than
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