How Hospira bulls are looking for more
David Russell | [email protected]
On Nov. 26, optionMONSTER's Heat Seeker market scanner detected heavy buying in the December 30 calls as traders looked for the pharmaceutical stock to bounce. It turned out to be a good call because HSP started higher two days later and hasn't looked back since.
While the shares are up less than 10 percent since that activity, the December contracts have more than tripled in value. So today, the investor sold 2,752 of the December 30s for an average premium of $1.375. He or she then purchased 2,800 January 35 calls for $0.20.
The net result is that they recovered $322,400, more than twice their initial investment. But because they rolled up to the January 35s, they stand to keep making money if the stock extends its gains into the New Year. (See our Education section) for more on how options can help you manage positions more effectively.)
HSP is up 0.56 percent to $31.47 in afternoon trading. The stock had been sliding since the summer despite three strong quarterly reports in a row.
Total option volume is almost 6 times greater than average in the name so far today, with calls outnumbering puts by 22 to 1.