Options Trading News

February 8, 2013  Fri 3:16 AM CT

Coach fell hard last month, and one investor is looking for a rebound.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 4,000 August 52.50 calls for $2.80 and the sale of an equal number of August 57.50 calls for $1.325. Volume was more than 5 times the previous open interest at each strike, so this is clearly new positioning.

The trade cost $1.475 to open and will earn a maximum profit of 239 percent if the specialty retailer closes at or above $57.50 on expiration. (See our Education section for more on the strategy, which is known as a bullish call spread because it leverages a move between two prices.)

COH fell 1 percent to $48.61 yesterday. It plunged on Jan. 23 after earnings lagged estimates and management announced a big change in its marketing strategy. Shares have been parked at long-term support around $50 since.

Using a call spread lets the investor take a shot with limited risk, looking for shares to retrace last month's bearish gap. It's an ideal strategy when a stock could have a dead-cat bounce but might also continue lower.

Total option volume in the name yesterday was almost twice its daily average, with calls dominating the action.
Share this article with your friends

Related Stories


Coach bulls see rally by Christmas

November 12, 2015

The last quarterly report on Oct. 27 was bullish for the accessories retailer, and the next set of numbers is estimated for pre-market hours on Jan. 26.



The fastest money in the market
View full report »

Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »