Long-term bet on International Paper
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring system detected the purchase of 9,800 January 2015 50 calls for $5.50. Equal-sized blocks were sold at the same time in the January 40 puts for $3.25 and the January 60 calls for $2.28. Volume was well above open interest at all three strikes, indicating that new positions were initiated.
The investor paid essentially nothing to implement the trade, which combines a vertical-spread strategy with short puts. They now stand to collect $10 if the packaging stock closes at $60 on expiration 16 months from now, with the risk of losing money on a drop below $40. (See our Education section)
IP is down fractionally at $49.12 in afternoon trading but is up 41 percent in the last year. It's been ripping higher as price increases fatten profit margins despite top-line weakness. Management boosted its dividend and announced a $1.50 billion share buyback earlier today.
Shares have been consolidating above $50 for most of 2013. Their all-time around $60 was achieved in early 2000, and today's bullish three-way strategy is apparently targeting a return to that level.
Total option volume is 8 times greater than average so far in the session, according to the Heat Seeker.