Options Trading News

March 6, 2013  Wed 4:14 AM CT

Foot Locker issues results Friday morning, and the bulls are stepping in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 5,000 April 36 calls for $1.05 to $1.10 against open interest of just 391 contracts. The shoe retailer jolted higher as the trades hit, indicating new money was put to work on the long side.

With these long calls, the investor now has the right to buy FL for $36 over the 6-1/2 weeks no matter how high the stock may go. That will produce significant leverage in the event of a rally, while also limiting the amount of capital at risk before the key earnings report. (See our Education section)

FL rose 2.46 percent to $35.34 yesterday. The stock rallied sharply from late 2011 to early 2012 and has been churning in a range since last summer. It's been consolidating above its 200-day moving average while making higher lows during that time, which could be leading some traders to expect another push higher.

Improving margins have helped the company's financial results, causing profit to beat expectations for at least the last four quarters.

Total option volume was 8 times greater than average in yesterday's session, according to the Heat Seeker. Calls outnumbered puts by a bullish 55-to-1 ratio.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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