Coach fell hard last month, and one investor is looking for a
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 4,000 August 52.50 calls for $2.80 and the sale of an equal
number of August 57.50 calls for $1.325. Volume was more than 5
times the previous open interest at each strike, so this is clearly
The trade cost $1.475 to open and will earn a maximum profit of 239
percent if the specialty retailer closes at or above $57.50 on
expiration. (See our
section for more on the strategy, which is known as a
bullish call spread
because it leverages a move between two prices.)
COH fell 1 percent to $48.61 yesterday. It plunged on Jan. 23 after
earnings lagged estimates and management announced a big change in
its marketing strategy. Shares have been parked at long-term
support around $50 since.
Using a call spread lets the investor take a shot with limited
risk, looking for shares to retrace last month's bearish gap. It's
an ideal strategy when a stock could have a dead-cat bounce but
might also continue lower.
Total option volume in the name yesterday was almost twice its
daily average, with calls dominating the action.
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