Options Trading News

May 24, 2013  Fri 5:15 AM CT

Fortress Investment pulled back yesterday, and the bulls piled in.

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.)
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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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