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November 7, 2012  Wed 2:45 AM CT

DECK: SEE CHART GET CHAIN FIND STRATEGIES
Deckers Outdoor has been going straight down, but one investor apparently thinks that it's ready to rally.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 25,000 January 40 calls for $0.80 and the sale of a similar number of January 50 calls for $0.10. Volume was below open interest at the higher strike, so there are two possible explanations for the activity.

One is that both trades were opened, in which case the strategy is a bullish call spread. That would leverage moves above $40, with a maximum gain of 1,329 percent if the footwear stock closes at $50 or higher on expiration. (See our Education section)

Alternatively, he or she may have previously owned the 50s and is now rolling the original position down to the 40s. That would lower the trade's break-even price by almost $10, thereby increasing the chance of earning a profit. Either way, yesterday's trade resulted in a cost of $0.70.

DECK rose 1.85 percent to $33.95 yesterday but has lost more than two-thirds of its value in the last year as sales of its UGG boots slow and sheepskin costs squeeze margins. Shares tanked in late October to their lowest level since 2009 after earnings missed expectations, but the stock has been attempting to rebound since then.

Overall option volume was 5 times greater than average, with calls outnumbering puts by a bullish 64-to-1 ratio.
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