For second time in less than a week, traders are looking for upside in iStar Financial.
optionMONSTER's Heat Seeker monitoring system detected heavy call buying in the commercial-mortgage company yesterday. The bulls initially targeted the November 13s for $0.35, followed two hours later by the December 14s for $0.30. More than 1,100 contracts traded in each, well above previous open interest and therefore new positions.
These long calls lock in the price where shares can be purchased, letting investors cheaply position for a move higher. They also stand to earn significant leverage from a rally but will expire worthless if shares remain below $13. (See our Education section)
SFI rose 1.34 percent to $12.84 and appears to have found support above its May peaks. The stock is now at its highest level in more than five years, with the potential to retrace its cataclysmic selloff during the 2008 financial crisis. That appears to be what the call buyers anticipate.
The company, which stood above $40 seven years ago, trades for less than book value. Given that banks have reported better loan quality this earnings season, some investors may think that SFI's business is also improving.
On Oct. 17 , our scanners detected a roll from the January 12 calls to the April 13s as a trader gave the shares more room to run.
Total option volume in SFI was 17 times greater than average yesterday, according to the Heat Seeker. The December 11 puts were also bought for $0.10 as investors hedged their bets before the next earnings report this coming Tuesday.
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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