The China bulls are tuning in for more upside in Youku Tudou.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 2,000 December 25 calls in the provider of
streaming-television services for $2.24, while an equal number of
December 30 calls were sold at the same time for $0.89. Volume
exceeded open interest at both strikes, indicating that new
positions were initiated.
Owning calls locks where a stock can be purchased, while writing
them creates an obligation to sell if a certain level is reached.
Combining the two lets investors control a move between two prices.
In the case of today's trade, they will collect $5 if YOKU closes
at or above $30 on expiration. He or she paid $1.35 to open the
strategy, implying profit of 270 percent.
Known as a
, the strategy is commonly used to generate leverage. (See our
YOKU is off 0.3 percent to $23.60 in afternoon trading but is up 27
in the last two months. While other
Chinese Internet stocks
have been red-hot all year, as shown on our
analysis tool, YOKU only started rallying in July. Its moving
averages are lining up bullishly, and today's trader is positioning
for a break above long-term resistance around $25.
Total option volume is twice the daily average so far in the
session, with calls outnumbering puts by a bullish 57-to-1 ratio.
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