Quick-money trade in Urban Outfitters
David Russell | firstname.lastname@example.org
optionMONSTER's tracking systems detected the sale of about 2,100 September 39 puts for $0.57 and the purchase of roughly the same number of September 38 puts for $0.32. Volume was more than twice open interest at both strikes.
The trader collected a credit of $0.25, which they'll get to keep if the retail stock closes above $39 at the end of next week. They most they stand to lose is $0.75, which would result from a close at or below $38.
Known as a put credit spread, the strategy is designed to capitalize on the quickening pace of time decay as expiration approaches. It also reflects confidence that the shares won't decline. (See our Education section for other market-neutral trades that make money from the passage of time rather than a directional move.)
URBN rose 1.94 percent to $39.48 yesterday and is up 29 percent in the last month. Most of that gain came after Aug. 20, when quarterly earnings and revenue beat expectations thanks to a better product mix. Shares are now back to the same level where they have peaked several times since April 2010.
The credit spread pushed total option volume to almost twice the daily average in the session.