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February 13, 2013  Wed 10:12 AM CT

MW: SEE CHART GET CHAIN FIND STRATEGIES
Men's Wearhouse has been swinging violently for the last year, but one investor apparently thinks that now is the time to get long.

optionMONSTER's tracking programs detected the purchase of 4,391 August 30 calls for $2.55 and the sale of an equal number of August 26 puts for $1.70. Volume exceeded the previous open interest at each strike, indicating that these are new positions.

The trade cost $0.85 and is similar to owning shares in the men's apparel retailer. The position carries much less risk than owning the stock but will track shares less closely as time passes and expire worthless if MW remains between the two strike prices through mid-August.

MW is down 0.72 percent to $29.06 in morning trading. It has fluctuated between about $26 and $40 since last March, one quarter gapping lower on poor results and ripping higher at other times as earnings improved.

In addition to its relatively low cost, a benefit of today's strategy is that it creates a limit order to buy shares at the $26 support level. (See our Education section for more about selling puts.)

Total option volume is 9 times greater than average so far in the session.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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