Is Logitech ready to make comeback?
David Russell | firstname.lastname@example.org
The maker of computer peripherals such as keyboards and webcams peaked over $37 in late 2007 but had fallen below $8 by late last year after cutting its financial targets and losing its CEO. But the most recent earnings report on April 25 beat expectations as new products helped fatten profit margins, suggesting that a turnaround may be at hand.
LOGI leapt on that news and consolidated for almost three weeks before rallying again yesterday. It gapped higher on the open and ended the session up 6.38 percent to $10.50.
Yesterday's option activity was positive as well, with investors selling more than 4,000 June 11 puts for $0.75. Open interest was just 24 contracts before the trade appeared, so the investor clearly initiated a new position.
He or she is now obligated to buy LOGI shares for $11 if they remain below that level on expiration, but including the credit already received, the effective entry price would the $10.25. The other possibility is that it will rally past $11, letting the trader keep the $0.75 while the puts expire worthless.
The unusual thing about the trade is that the short puts were in the money, which gives them a risk profile similar to owning stock or calls. The difference is that their profits stop at $11. (See our Education section for more ways that options can be used to get long or short stocks.)
Overall option volume in LOGI was 9 times greater than average in the session.