Trade calls a bottom for DreamWorks
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker tracking system detected the purchase of 7,500 September 20 calls for $1 and the sale of an equal number of September 15 puts for $0.65. Volume was more than 30 times open interest at both strikes.
DWA is off 0.39 percent to $17.75 in afternoon trading. The move studio's stock lost more than 40 percent of its value in 2011 but has been holding long-term support since then while making incrementally higher lows. Short interest also represented 29 percent of the float in mid-March, which could potentially fuel buying if those traders are forced to cover their positions.
Some investors doubled their money with DWA calls in February, but the stock then gapped lower after a poor earnings report later in the month. Despite the weak results, some investors may consider the stock attractive because it's valued at about 1.1 times book value. Most media companies trade for at least twice that multiple.
Today's option strategy earned an initial credit of $0.35 and will leverage upside in the stock. It obligates the investor to buy shares for $17.50 if they fall to that level, but he or she may be comfortable taking that risk given the valuation and the apparent support in place. (See our Education section)
More than 15,000 contracts have traded in DWA so far today, 31 times the average amount.