Options Trading News

April 30, 2012  Mon 2:44 AM CT

Select Comfort has pulled back after a monster run, and the bulls are stepping in.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 2,600 May 30 calls for $1.15 and $1.20. Volume exceeded previous open interest of 1,872 contracts, indicating new positions were initiated. The stock rose as the calls traded and finished the session at its highs.

SCSS rose 4.18 percent to $29.94 on Friday. The mattress maker almost tripled between early October and mid-April amid strong demand for its products but fell sharply after a lukewarm earnings report two weeks ago.

The stock is now attempting to hold support around a key level where it consolidated in February, which could be leading some chart watchers to believe that it's still in a bullish uptrend. The current price area is also roughly where SCSS made its previous all-time high in 2006.

Luxury mattresses have enjoyed a strong secular growth trend in recent years as they take market share from traditional manufacturers such as Sealy. The other big company in the group, Tempur-Pedic, had also been rallying but cratered on April 20 after results failed to meet lofty expectations. (See researchLAB for more)

Overall option volume in SCSS was quadruple its daily average, with calls outnumbering puts by 38 to 1.
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