Bullish momentum trade in Masco
David Russell | email@example.com
optionMONSTER's Heat Seeker monitoring program detected the purchase of 6,040 October 19 calls for $2.20 and the sale of an equal number of October 21 calls for $1.15. It resulted in a cost of $1.05.
Volume was below open interest in the 21s but not the 19s, so there are two possible explanations for the trade. One is that the investor had bought the 21s when MAS was at a higher price and now rolled the position lower after the stock fell. That increases the delta of the options and thus their sensitivity to small moves in the share price.
Alternatively, the trade could be a vertical spread that is looking to collect $2 on a move to $21. But that would be unusual because the maker of building materials is already above $19, making those calls in the money. (See our Education section)
MAS is up 0.72 percent to $19.69 in morning trading. It more than tripled between October 2011 and mid-May as capital poured back into housing-related stocks, but it has followed the broader market lower since. The stock now trying to hold support around its 100-day moving average, which could be leading some chart watchers to believe that the momentum remains positive.
Total option volume in MAS is 10 times greater than average so far today, with calls outnumbering puts by a bullish 43-to-1 ratio.