Call buyers see a new life for Nu Skin
David Russell | email@example.com
The seller of anti-aging products roughly doubled between April 2011 and April 2012, fueled by a string of better-than-expected earnings reports. The last release on April 26 was also strong, but management did not raise guidance. Investors initially responded by erasing more than one-quarter of the stock's value, but yesterday the bulls returned.
NUS soared into the close, finishing higher by 15.51 percent at $46.46. Activity in the option market was also impressive.
More than 3,000 June 40 calls were bought, with the largest block pricing for $5.20, according to optionMONSTER's Heat Seeker program. Volume was 18 times open interest in the strike.
Those calls lock in the price traders must pay for NUS shares, which can result in significant leverage in the event of a rally. For example, if the stock goes to $50, those calls will roughly double in value.
The advantage of buying calls rather than directly purchasing shares is that only the premium will be lost if the stock falls. (See our Education section)
Overall option volume in the stock was 4 times greater than average in the session, with calls outnumbering puts by more than 2 to 1.