CareFusion reports earnings next week, and traders are hoping for a big rally.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 1,700 September 45 calls for $1.90 and the sale of an equal number of September 39 puts for $0.25. Volume exceeded the previous open interest in each strike, which indicates that this is new positioning.
The strategy cost $1.65 to implement and is similar to owning shares in the medical-products company. The position will generate significant leverage in a rally, but the trader would be on the hook to buy shares if they fall below $39. (See our Education section for more on long calls and short puts .)
CFN fell 0.62 percent to $44.73 yesterday. It almost doubled between late 2012 and early this year, then pulled back to its 200-day moving average in April before surging to new highs by early July. The next set of quarterly results is due after the closing bell on Thursday, Aug. 7.
It's noteworthy that the investor sold puts at the $39 strike because it's roughly the same level where CFN peaked one year ago. That could make some chart watchers expect it to provide support if the stock declines instead of rallying as hoped.
Overall option volume was 10 times greater than average yesterday, with that bullish combination trade accounting for more than 90 percent of the total.
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