GSI Commerce is challenging key resistance levels, and one trader is positioning for a breakout three days before the company's earnings report.
optionMONSTER's Heat Seeker tracking system detected the purchase of 1,500 December 28 calls for $0.90 and the sale of an equal number of December 23 puts for $0.90. There was no open interest in either strike before the trade occurred.
GSIC is up 2.44 percent to $25.62 in afternoon trading and fighting its way back from a large bearish gap that occurred on July 29 after earnings missed expectations. Despite the miss, the provider of e-commerce services forecast a strong third quarter. The next financial release is scheduled for after the bell on Wednesday.
The shares have now filled about half of that bearish gap and are attempting to push clear of the $25.50 level that provided support shortly before the selloff. They're also attempting to climb through the 100- and 200-day moving averages.
The option strategy cost nothing to implement and will simulate a long position in the stock. It will make money if GSIC closes above $28 on expiration and lose money below $23. The position will expire worthless between those two levels.
Short interest represented a hefty 19 percent of the float as of Sept. 30, so today's trade may be the work of a short seller looking to hedge a bearish position.
Overall option volume in GSIC is 5 times greater than average, according to the Heat Seeker.
(Chart courtesy of tradeMONSTER)
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