Markets

Trader sees top in Tempur-Pedic

Tempur-Pedic is slamming into resistance, and one investor is heading for the exit.

optionMONSTER's tracking systems detected the sale of 2,500 December 36 calls for $1.10 and $1.15 against open interest of 851 contracts. The trade pushed total options volume in the mattress company to 5 times greater than average.

TPX fell 0.79 percent to $36.62 in morning trading but has rallied 30 percent in the last three months. The company announced better-than-expected earnings on Oct. 19 and raised guidance in its eighth consecutive strong report.

The stock peaked at $38.01 yesterday, slightly above its highs around $37.70 from late 2007 but was unable to hold those gains. Given this elevated price, today's option trader apparently thinks that TPX has little additional upside potential.

Selling calls lets the investor earn income from that belief. The contracts may have been written against a long position in the stock as a means of locking in an exit price, or as a simple short strategy. (See our Education section)

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

TPX

Other Topics

Options

Latest Markets Videos