Trader stays with Bally for the long term
David Russell | email@example.com
optionMONSTER's Heat Seeker detected the purchase of 4,000 January 55 calls for $1.05 and the sale of an equal number of July 50 calls for $0.30. Volume was below open interest in the July contracts but not January, which suggests that an existing position was closed and rolled from one strike to the other.
The trade cost $0.75 and gives the investor an additional six months to profit from a rally in the maker of gambling machines for casinos. Adjusting the strategy now makes sense because those July calls will lose value at an accelerating pace over the next 5-1/2 weeks and track movements in the share price less closely.
BYI rose 1.56 percent to $46.19 yesterday. The stock is up more than 20 percent in the last six months but has been hitting resistance around the same level where it peaked in late 2007.
Owning calls ensures the trader a piece of the action if a breakout occurs, while limiting pain if it drops. (See our Education section)
Some 8,000 Bally contracts traded yesterday, compared with fewer than 900 in a typical session. Calls accounted for more than 99 percent of the total, according to the Heat Seeker.