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Fluor pullback draws bullish strategy

By: optionMONSTER
Posted: 6/22/2012 3:10:00 AM
Referenced Stocks: FLR

Fluor is near its long-term lows, but one investor apparently finds it attractive at these levels.

optionMONSTER's systems detected the purchase of about 2,000 January 50 calls for $3.71 and the sale of an equal number of January 42.50 puts for $3.31. Volume was more than 5 times open interest at both strikes.

The investor now stands to profit from a rally in the construction company because higher share prices will make the long calls appreciate and reduce the value of the puts sold short . If FLR declines, however, the opposite will be true and they will face losses.

While similar to owning shares, the position is much more leveraged thanks to its low entry price of just $0.40. That would translate into a profit of 900 percent if the stock rallies just 16 percent to $54. It also differs from owning common equities because it will track movements in the share price less closely as time passes and will expire worthless if the stock remains between $42.50 and $50.

FLR declined 3.93 percent to $46.73 yesterday. It has lost 23 percent of its value in the last three months and is back near the same level where it bounced in October. The last earnings report on May 3 beat expectations and guidance was strong, which could also make traders expect a rebound.

Overall option volume was triple the daily average, according to the Heat Seeker.