Markets

Bull fashions big trade in Guess

Guess has been beaten down, but one big investor is shopping for a rebound.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 5,000 January 30.80 calls for $0.70, and the sale of a matching number of January 20.80 puts for $0.55. Volume was more than 20 times the previous open interest in each strike, which indicates that new positions were initiated.

Owning calls locks in the price where a stock can be bought, so the strategy will make money from a rally. Shorting the puts also make money if the stock rises, providing income from the sale as they lose value later.

Combining the two trades is highly bullish, creating a position similar to owning shares for a small initial cost. But there is also considerable downside risk, as the trader would be on the hook to buy shares if they fall below $20.80. (See our Education section)

GES rose 1.05 percent to $26.05 on Friday. The apparel company is down 16 percent so far this year, following other retailers lower. The stock gapped down in late May after sales missed estimates but is now trying to hold support around the same level where it bounced in late 2012. That could make some chart watchers expect a rebound.

Total option volume in Guess was 6 times greater than average in the session, according to the Heat Seeker.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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