Markets

Bulls sprint into Collective Brands

Shares of Collective Brands are basing after getting routed in the spring, and one investor is positioning for a long-term rally in the heavily shorted stock.

PSS

optionMONSTER's Heat Seeker tracking system detected the sale of 1,750 January 2012 15 puts for $2.65 and the purchase of an equal number of January 2012 17.50 calls for $2.65. Volume was more than 15 times open interest in both strikes.

The trade cost nothing to implement and will provide major leverage if the shoe retailer rallies above $17.50 by expiration. The strategy is the equivalent of owning 175,000 shares and will lose money if PSS drops below $16.

The stock is up 1.93 percent to $15.83 in morning trading after announcing plans to open Stride Rite stores in China. The company, which lost half its value between late April and late August, started showing signs of improvement on Oct. 21 when management said sales would start growing again.

The midpoint of its earnings guidance range for next fiscal year was also above the average analyst forecast. The next earnings release is scheduled for after the bell on Dec. 1.

Short interest in PSS represented a hefty 23 percent of the float at the end of last month, which could draw buyers.

Overall option volume in the stock is 9 times greater than average so far today.

(Chart courtesy of tradeMONSTER)

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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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