Bulls go shopping at Ascena Retail
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,000 March 18 calls for $0.15 and $0.20. Volume was more than twice the previous against open interest at the strike, indicating that new money is being put to work.
The investor now has the right to buy the stock for $18 in the next three weeks, no matter how high it might trade. That could result in some nice leverage in the event of a rally, but the calls will expire worthless if it doesn't move.
He or she is probably hoping for a strong quarterly report but also wants to limit losses if results are weak--an ideal use of long calls. While the company hasn't yet announced the date of its second-quarter release, last year it occurred in early March. (See our Education section for more on how options can be used to manage risk.)
ASNA is down 2.1 percent to $16.75 in afternoon trading and has lost 13 percent of its value in the last six months. The company, whose brands include Dressbarn, Maurices, and Justice, rallied on strong earnings in 2011 and early 2012 but has been disappointing investors more recently.
Total option volume is 14 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by a bullish 25-to-1 ratio.