One investor thinks Xerox will grind higher into the spring.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 4,700 April 7 calls for $1.27 and the sale of an equal number of January 7.50 calls for $0.57. Volume was below open interest in January, so it appears that a bullish position was rolled from one contract to the other.
The transaction is interesting because the calls have different strike prices. It cost $0.70 but, because the calls were moved $0.50 deeper into the money , it really only cost $0.20. In return for that outlay, the trader gets an additional three months to profit from upside in the slow-moving stock.
XRX rose 3.89 percent to $8.02 yesterday and is trying to recover from the market's August selloff. The imaging company's last two earnings reports beat expectations as management seeks to increase its reliance on recurring revenue streams rather than equipment sales. (See researchLAB for more)
Yesterday's option trade was also noteworthy because the investor would have been at risk of losing premium on the January calls as expiration approaches. Rolling the position now prevented them from the accelerated pace of time decay that occurs as options near the end of their lives.
More than 16,000 contracts traded overall in XRX during the session, which is almost 5 times more than change hands in a typical session.
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.
Latest Markets Videos
- The $12 Trillion "Once-in-a-Lifetime" Market Opportunity Investors Won't Want to Miss
- J.P. Morgan Says These 3 Stocks Could Surge Over 100% From Current Levels
- Forget Tesla's Battery Day, These EV Stories Are More Important
- ChargePoint, Switchback Energy Acquisition Enter Business Combination Agreement