Foot Locker has been slowly grinding higher, and one investor is turning time into money.
optionMONSTER's Heat Seeker system detected the sale of 3,000 May 60 calls for $1.80 yesterday. An equal number of number of April 60 calls was bought for $1, but volume was below open interest in that strike. This suggests that an existing short position was rolled forward in time.
The trader probably owns shares in the shoe retailer and sold the April contracts as part of a covered call . The strategy earns income now in return for relinquishing upside potential. (See our Education section)
Yesterday's transaction, for instance, yielded a credit of $0.80. If repeated each month, that money would be 5 to 10 times the company's $1 annual cash dividend.
FL declined 1.52 percent to $60.84 yesterday. It rallied from its 200-day moving average around $52 in mid-January to an all-time high above $63 in late March but has pulled back more recently.
Earnings and sales have both beaten estimates for at least five straight quarters. Companies with such strong fundamentals often attract covered-calls as investors seek so-called bond surrogates when interest rates are low.
There also appears to be significant support around last year's $58 high.
Total option volume in FL was 21 times greater than average in the session.
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