What's behind huge Masco volume

By David Russell,

Shutterstock photo

Masco shattered resistance yesterday, and option activity went through the roof.

Our tracking systems detected a surge in both calls and puts on the company, which sells an array of home-related products such as Bristan showerheads, KraftMaid cabinets, and Cobra drain cleaners.

MAS It started early in the session as investors purchased the December 13 calls for as little as $0.15. The shares would rally later in the day, at one point gaining more than 8 percent, and the premiums on those calls would jump as high as $0.55.

MAS ended the session up 5.82 percent at $13.10 amid heavy stock volume. It spent about five months grinding between $10 and $12 (orange lines on chat) but began breaking out at the beginning of December.

Yesterday's move brought the shares above their 200-day moving average for the first time since May. The rally was foreshadowed by heavy buying in the April 14 calls on Tuesday. Those options traded another 3,400 contracts yesterday, mostly for $0.90 and $0.95, almost double their premium the previous session.

Interestingly, the busiest strike yesterday was the April 12 puts, where an investor purchased a block of 25,000 contracts for $1. The transaction occurred minutes after heavy buying in the stock, which suggests that the puts were bought as a protective position on the shares. (See our Education section)

Overall option volume in MAS was more than 230 times greater than average in the session.

(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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