Vitamin Shoppe has been trending higher since it went public in late 2009, and one investor is using a leveraged strategy to ride the rally.
optionMONSTER's Heat Seeker tracking system detected the purchase of about 5,000 May 35 calls for $1 and the sale of a matching number of May 30 puts for about $0.83. Volume was more than 50 times open interest in both strikes.
The trade resulted in a cost of about $0.17 and will make money if the vitamin retailer pushes quickly toward or above $35. The position will lose money below $30 and expire worthless between those two levels.
VSI slipped a penny to close at $32.40 yesterday. The company has been steadily growing by adding new locations and increasing sales at existing stores while expanding margins. Its book value increased by a stunning 27 percent in 2010 as cash accumulated and debt was cut nearly in half.
The shares have slowed their advance since about December and have now pulled back to their 100-day moving average (light blue line on chart at right)--a level where some traders may think that they're attractive and look to get long.
The bullish trade pushed total option volume in VSI to more than 400 times the daily average, according to the Heat Seeker.
(Chart courtesy of tradeMONSTER)
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