The credit draught has been good for pawnbroker EZCorp, and one
investor is looking for more gains with the stock at all-time
optionMONSTER's Heat Seeker monitoring system detected the purchase
of about 3,600 December 25 calls for $1.25 and the sale of a
matching number of November 22.50 calls for $2.50. Volume in the
November contracts was below open interest, indicating a long
position in the contracts was rolled from one strike to the other.
The trade let the investor recover $1.25 of principal while adding
a month of upside exposure. The trade also more than tripled the
position's gamma to 16 from about 5, which will increase leverage
if the stock continues to rally. (See our Education section)
EZPW fell 0.24 percent to $24.96 yesterday and but up 39 percent
since the beginning of September. It reported better-than-expected
earnings and revenue on Nov. 5 as borrowers hock valuables because
they can't borrow from banks. Management also issued bullish 2011
guidance and said it had opened or acquired 127 new locations in
the last fiscal year.
Despite its big run, EZPW is trading for less than 10 times forward
earnings and has as price/earnings growth ratio of only about 0.66,
which could be leading some investors to expect further upside.
Overall option volume in the stock was 26 times greater than
average yesterday, with calls accounting for 91 percent of the
(Chart courtesy of tradeMONSTER)