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.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »