GNC trader looks for blowout quarter
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker monitoring program detected the purchase of more than 5,000 March 40 calls for $2.90. Volume was more than 7 times open interest at the strike.
The trader has now locked in $40 as an entry price for the vitamin retailer, no matter how high the shares climb over the next four months. Those long calls stand to generate major leverage in the event of a rally, while they will lose value if it doesn't climb.
Investors often use options because they're cheaper than the stock, reducing losses if the investor is wrong about its direction. (See our Education section for more on how to manage risk.)
GNC is down 0.63 percent to $38.14 in afternoon trading. It more than doubled between going public in April 2011 and July of this year but has been consolidating since. Earnings have beaten estimates for at least the last four quarters, so today's call buyer is positioning for another strong report.
Overall option volume is 10 times greater than average in the session, with calls outnumbering puts by a bullish 6-to-1 ratio.