Mohawk Industries reports earnings next week, but the bulls are
willing to wait for their move.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of about 2,000 November 125 calls for $5.22 and the sale
of a similar number of November 95 puts for $1.72. Volume was more
than 8 times open interest at both strikes, indicating that new
positions were initiated.
Owning calls locks in the price where shares can be purchased, and
selling puts creates an obligation to buy them in the event of a
pullback while generating income now. Combining the two strategies
is bullish because it reflects a belief the stock will both go up (
) and not go down (
). Both halves of the trade stand to lose money to the downside,
but if it goes up the leverage could be significant. (See our
MHK rose 1.26 percent to $117.25 yesterday. The flooring
manufacturer almost tripled between October 2011 and earlier this
year but has been moving sideways ever since. Earnings have been
strong, and the next set of numbers will be released after the
closing bell next Thursday, Aug. 1.
Yesterday's strategy is interesting because it prevents the
investor from missing a breakout above $125--a level the stock has
never seen. It also programs a buy order at the same $95 area where
MHK consolidated early this year before muscling into triple
Total option volume was 29 times greater than average in the
session, according to the Heat Seeker.