Barbarians have been at the gates of CommonWealth REIT, and
yesterday the options traders jumped in.
optionMONSTER's Heat Seeker system detected the purchase of about
2,000 October 25 calls for $1.30. Seconds later, a similar number
of October 30 calls were bought for $0.35. Volume was more than
triple the previous open interest at each strike, indicating that
new money was put to work on the long side.
lock in prices where investor can buy the stock no matter how high
it may rise, which gives them potentially huge leverage if it
continues to advance. (See our
CWH exploded higher on Tuesday after Corvex Management and Related
Cos. offered to buy the real-estate investment trust for $27 a
share, arguing that they could manage it more profitably.
The shares were up barely 2 percent when yesterday's calls were
purchased, but the traders were apparently onto something because
CWH rallied hard into the close and shot up 12 percent to $25.25.
Related and Corvex apparently think that the shares belong closer
to $50, so if they work toward that level the call buyers will be
looking at quadruple-digit gains.
Total option volume was 14 times greater than average in the name.
(A version of this post appeared on