Options Trading News

May 16, 2013  Thu 4:45 AM CT

Someone apparently thinks that Select Comfort is going back to the old highs.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,010 December 25 calls for $2.35 and the sale of an equal number of December 35 calls for $0.37. There was barely any open interest at either strike before the trade appeared, indicating that new money was being put to work.

The trade cost $1.98 and will generate a maximum profit of 405 percent if the mattress stock closes at or above $35 on expiration. (See our Education section for more on the strategy, which is known as a bullish call spread because it leverages a move between two prices.)

SCSS fell 0.04 percent to $22.47 yesterday. The stock had an explosive run between mid-2009 and April 2012 as a shift to new types of bedding drove the shares up more than 3,000 percent. It's been languishing since then as growth slows.

The shares seem to have made a double bottom around $17 in recent months and have been working their way higher since. Yesterday's trader is apparently looking for a return to the all-time high near $35 made last year.

Total option volume was 6 times greater than average in the session, with calls outnumbering puts by 30 to 1.
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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