Someone apparently thinks that Lear is poised for a breakout.
The maker of automotive seats has gained more than 60 percent since late July and is now sitting around the same $56 level where it hit resistance in two years ago. Instead of risking a lot of capital buying shares after such a move, one investor is using options to manage the trade.
optionMONSTER's Heat Seeker tracking system detected the purchase of about 2,000 September 60 calls for $2.80. Open interest stood at just 6 contracts when the session began, which means that new money was put to work on the long side.
These long calls give the trader the right to buy LEA for $60 in the next six months, no matter how high shares may go. That will prevent him or her from missing a rally while dramatically reducing the amount of capital at risk. (See our Education section)
LEA is up 0.14 percent to $55.80 in morning trading. Its advance has been supported by strong earnings amid a rebound in North American vehicle demand.
Total option volume in the name is 8 times greater than average so far today, according to the Heat Seeker. Calls outnumber puts by more than 500 to 1.
More From optionMONSTER
- Cramer: Enemies of wealth creation
- Aeropostale sinks on weak outlook
- Stock indexes pause after broad gains
- Investment & Company Information