One large investor apparently thinks that Allstate still has
plenty of room to the upside.
optionMONSTER's Heat Seeker tracking system detected the
purchase of 7,500 January 2012 35 calls for $3.50. At about the
same time, equal-sized blocks of January 2012 30 puts and January
2012 45 calls were sold for $3.45 and $0.85 respectively.
The investor collected a credit of $0.80 and will have the
opportunity to earn an additional $10 if ALL reaches $45 by
expiration 14 months from now. It will lose money if the shares
fall below $29.20.
It's an extremely leveraged long-term strategy bet that the insurer
will continue gaining after rallying 15 percent in the last six
weeks. ALL closed at $32.94 yesterday, up another 1.29 percent.
The company, along with other property-and-casualty names such as
Chubb and Progressive, has benefited from a positive underwriting
trends as companies pay out a smaller proportion of their premiums
in the form of claims. ALL's operating earnings on Aug. 4 were
better than expected as it dropped less profitable customers and
Overall net income fell because of losses on derivative positions
and weakness in the broader stock market. Given the recent rally in
equities, Wednesday's option trader may expect those losses to
become gains when third-quarter results are issued on Oct. 27.
The bullish strategy pushed total option volume in ALL to more than
4 times greater than average in yesterday's session.
(Chart courtesy of tradeMONSTER)