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Trader thinks Warnaco has hit ceiling

Warnaco is slamming into resistance after a big run, and traders are calling a top.

optionMONSTER's tracking systems detected the sale of about 2,000 August 45 calls against open interest of 831 contracts. The first lot was sold shortly after the open for $1.70, followed by subsequent transactions for $1.30 to $1.65.

WRC Chart

WRC fell 2.12 percent to $42.95 in afternoon trading, pulling back from a two-month high of $44.52 reached in the morning. The clothing company raised its full-year revenue and earnings forecasts the last time it issued results on May 10 but then fell along with the rest of the market for the next two months.

It started rallying after finding support around $35 in early July, and began the session with a 21 percent gain for the month. That run pushed WRC through its 200-day moving average, and now it appears to be hitting resistance at its 100-day moving average.

Selling calls allowed the investor to collect premium in return for betting the stock will remain below $45 through expiration. The trade could be been implemented by a shareholder willing to exit WRC at $45, plus the premium, or by a bear looking to take a short position.

The next earnings release hasn't been scheduled yet, but it will likely be about Aug. 10, based on the release date last quarter and last year.

The trade pushed total options volume in the name to 14 times greater than average so far today.

(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.

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

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