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October 4, 2012  Thu 11:08 AM CT

TJX: SEE CHART GET CHAIN FIND STRATEGIES
One investor apparently believes that discount retailer TJX will keep running.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 7,500 October 45 calls for $1.025 and the sale of an equal number of November 47.50 calls for $0.55. Volume was below open interest in the Octobers, so there are two possible explanations for the activity.

One is that both positions were opened, in which case the strategy was a bullish diagonal spread. That entails buying and selling options at different expiration months to take advantage of higher premiums in the longer-dated contracts.

The other possibility is an existing short position was rolled from one strike to the other. In that case, the investor probably owns shares in the discount retailer and is using the options as part of a covered-call strategy.

The trader paid $0.475 to open the position and stands to collect an additional $2.50 on the stock if it closes at or above $47.50 on expiration.

TJX is up 0.82 percent to $45.58 in early afternoon trading and has risen 41 percent this year. The stock has been steadily trending higher as its T.J. Maxx and Marshalls brands gain market share. Today the company reported that same-store sales rose 6 percent last month, beating the 4.4 percent gain expected by analysts.

Overall option volume in the stock is quadruple the daily average, with calls outnumbering puts by 18 to 1.
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