Tempur-Pedic is drawing downside positions before it reports
earnings tomorrow afternoon.
optionMONSTER's Depth Charge tracking system detected the purchase
of about 2,900 February 55 puts for $1.90 to $2. Roughly the same
number of February 50 puts were also sold for $0.925, pushing
volume to more than 4 times open interest in both strikes.
The trade resulted in a cost of about $1 and will let shareholder
rest easy as the numbers are released. The strategy has the
potential to earn a profit of some 400 percent if TPX closes at or
below $60 on expiration.
In this type of
, the trader uses the credit from selling one set of options to
finance the purchase of other contracts. (See our
section for more on how investors can use options to generate
significant leverage from modest fluctuations in stock prices.)
TPX fell 2.55 percent to $61.21 on Friday. It's been consolidating
in a range for the last eight months following a 1,000 percent
rally that began in March 2009. Along with Select Comfort, the
stock has ridden a secular bull market in
with advanced technology and materials, while traditional
manufacturers such as Sealy struggle to survive.
Overall option volume in TPX was 11 times greater than average in
the session, according to the Depth Charge.
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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