Trucking company YRC Worldwide has taken a beating, and one investor is positioning for a rebound.
optionMONSTER's tracking systems detected the purchase of 14,000 July 2.50 puts for $1.07. An equal number of April 5 puts was sold at the same time for $2.79 against existing open interest, which indicates that a position was rolled from one contract to the other.
The investor collected a credit of $1.72, while moving to a lower strike and extending their protection by three months. The move appears bullish because the he or she no longer wants to own the April 5 puts, which had a delta of -0.88. That means the position will lose $0.88 for every $1 that YRCW appreciates. (See our Education section)
The trade was probably the work of shareholder who used the April contracts as a hedge on stock. Rolling the position lets the investor collect some cash to compensate for the recent drop in the share price while adjusting it to the stock's new level.
The move stands in contrast with a short call roll on the stock yesterday, where an investor opted to collect a credit of $0.23 in exchange for lowering the exit price on the shares to $2.50 from $3.50. Given that YRCW is now up 7.17 percent to $2.54, that trade isn't looking like a winner.
The stock got slammed on Monday after agreeing to a restructuring plan that would give creditors and workers a huge equity stake in the company. It bottomed at $2.01 the next day and has been working its way higher since.
The drop was a continuation of a downtrend that has been in place since March 2005, when shares traded for more than $1,600--adjusted for a reverse split last year. The bulls, however, may like YRCW because it issued a strong earnings report on Feb. 4. Con-way, another trucking company, said yesterday that pricing was improving in the industry as capacity tightens.
Overall option volume in YRCW is 5 times greater than average so far today.
Disclosures: I own YRCW shares.
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