Learn the trade here. Make it on tradeMONSTER

Options Trading News

April 11, 2013  Thu 3:47 AM CT

GPS: SEE CHART GET CHAIN FIND STRATEGIES
One investor is using options to time an entry into Gap, which reports same-store sales today.

Our Heat Seeker monitoring system detected the purchase of 5,000 April 38 calls for $0.44 and the sale of a matching number of May 41 calls for $0.19. Volume was more than 7 times the previous open interest at each strike, indicating that new positions were initiated.

Known as a diagonal call spread, the trade cost $0.25 to open and lets the investor lock in a $38 purchase price on the retailer's stock. He or she will then be on the hook to exit the position at $41 if it climbs to that level by expiration in mid-May.

The benefit of the strategy is that it cost relatively little to open and can be closed cheaply if the stock falls. (See our Education section for other risk-management techniques.)

GPS rose 1.22 percent to $37.19 yesterday. It's up 41 percent in the last year and is now parked at its highest price since mid-2000.

Total option volume was 9 times greater than average in the session, according to the Heat Seeker. Calls accounted for a bullish 81 percent of the total.
Share this article with your friends


Related Stories

GPS

Gap receives a vote of confidence

November 12, 2014

The clothing retailer reports earnings next week, and traders apparently believe that downside potential in the stock will be limited.

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Webinar Playback

eSignal "Back in Black": Multi-Speaker Free Webinar

Education & Strategy

Some things aren't what they seem

As we scan the Heat Seeker, Depth Charge, and other option-tracking systems, we sometimes see heavy activity in calls and...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER