Long-term bull goes shopping at Sears

optionMONSTER

As Sears tries to recover from a sharp fall at the end of 2012, a long-term trade is looking for big gains in the next two years.

More than 70,000 SHLD options have changed hands this morning, compared with a daily average of 4,000 in the last month. optionMONSTER systems show that most of action is in a January 2015 call spread.

A trader bought 3,000 of the 60 calls for $6 and sold the same number of the 70 calls for $3.20. These are new positions, as the open interest in each strike was below 100 contracts before  trading began today.

The vertical spread cost $2.80 to open, which is the maximum potential loss if SHLD remains below $60. The maximum gain of $7.20 would be realized if shares are above $70 at expiration in mid-January 2015. (See our Education section)

SHLD is jumping this morning, up 7.45 percent to $44. The department-store operator was just shy of $70 in early November but was testing support at $40 at the end of 2012, its lowest levels since last January.

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