Fortress pullback brings out the bulls
David Russell | [email protected]
optionMONSTER's Heat Seeker system detected the purchase of 2,200 September 6 calls for $1.25 to $1.40. The volume exceeded the strike's previous open interest of 1,438 contracts, indicating that new positions were implemented.
The investor now has the right to buy shares in the hedge-fund/private-equity company for $6 through expiration. The cheapness of these long calls relative to the stock limits the amount of capital at risk and creates the possibility of significant leverage in the event of a rally. For instance, a 25 percent gain would more than double the value of the options. (See our Education section.)
FIG was unchanged when the trade hit, but it ended the session up 1.84 percent to $7.18. It's been riding a wave of bullish sentiment toward the broader market and also benefits from owning a large slug of high-flier Nationstar Mortgage.
Total option volume was twice the daily average yesterday, with calls outnumbering puts by more than 10 to 1.
(A version of this post appeared on InsideOptions Pro yesterday.)