Bulls refuse to back down on MetLife
David Russell | [email protected]
optionMONSTER's Heat Seeker market scanner detected the purchase of 3,000 March 39 calls for $0.49 in one print against previous open interest of 2,579 contracts. A block of 1,000 March 36 calls was sold around the same time for $1.45, but volume at that strike was below open interest.
This suggests that an existing long position was closed at the lower strike and rolled higher. Such a transaction is highly bullish because the investor walked away from certain profits in the near term and paid a small amount to get even more upside exposure at the March 39s.
Alternatively, both legs of the strategy could have been opened, in which case the position is a bullish backspread. That trade would earn huge profits if the insurance stock moves above $42 but would incur losses below that level.
MET is down 0.7 percent to $35.70 this afternoon but is up 10 percent in the last week. Like many names in the financial sector, the stock continues to trade for barely half its book value, which could be leading some investors to expect that it will continue to melt higher in the long run.
Later in the session, 2,500 March 35 puts were sold for $1.39 and an equal number of March 35 calls was bought for $1.97. The resulting position cost $0.58 and is similar to owning shares, with the calls appreciating and the puts depreciating in the event of a rally. The opposite will happen to the downside. (See our Education section)