Valassis Communications has rallied more than 2,400 percent off its 2009 lows, and options activity continues to paint a bullish picture for the marketing firm.
Our tracking systems detected two trades that suggest the overall sentiment remains positive on the direct-marketing company. The first strategy was outright buying of the December 35 calls, which changed hands 1,669 times for $3.60 against open interest of 798 contracts.
About 15 minutes later, more than 4,000 August 32.50 puts were sold, mostly for $0.70. The two trades pushed total options volume in VCI to more than 4 times the daily average.
The stock fell 2.44 percent to $34 in morning trading and has spent the last three months consolidating above $30. Given its historic reliance on debt to finance operations, VCI had traded near $1 at the depths of the credit crunch as investors worried about the ability of leveraged companies to meet their obligations.
Since then, it has benefited from a return to normality in the credit market and a rebound in advertising. Management increased full-year earnings and EBITDA forecasts the last time the company issued results on July 29.
Today's option action suggests a belief the shares remain in a long-term uptrend but may take several months to start rallying again. It made a higher high in June, followed by a lower low in July, a chart pattern that may cause some traders to expect a period of consolidation.
(Chart courtesy of tradeMONSTER)
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