Bulls are driving back to BorgWarner
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the sale of 1,500 October 50 puts for $0.90. At the same time, 750 contracts were bought in each the October 65 calls for $1.24 and the October 70 calls for $0.36.
The trade resulted in a credit of about $0.10 and will profit from a rally in the maker of auto parts. By combining two calls, the investor created a position with the potential to earn massive profits if BWA rallied significantly above $70. They also stand to lose money to the downside. (See our Education section)
BWA lost 1.24 percent yesterday to close at $59.15 and has fallen to the same $60 area where it paused while advancing last November. If that old resistance level now becomes support, chart watchers will probably consider it a bullish sign.
Its last earnings report on July 28 beat expectations on the top and bottom lines. Management also raised guidance, citing strong demand for its fuel-efficiency products.
Investors returned to the October 70 calls later in the session, pushing total volume north of 1,500 contracts in the strike.
Overall option volume in BWA was about 9 times greater than average, according to Heat Seeker.