Is Skullcandy ready for a bounce?

optionMONSTER

Skullcandy has struggled recently but saw bullish option activity yesterday.

optionMONSTER's Heat Seeker scanners show that chunks of December 5 calls were purchased for $0.55. More than 1,400 traded in volume well above the strike's previous open interest of just 47 contracts, indicating that this is fresh buying.

These long calls lock in the price where shares can be bought, providing investors with a less expensive way to benefit from a rally without paying for the stock directly. They can generate some nice leverage in a rally while limiting losses if the stock drops. (See our Education section)

SKUL ended the session down 1.17 percent to $5.07. Calls outpaced puts by 3,300 to 173, a reflection of the day's bullish sentiment. Total option volume in the name was 10 times greater than average.

The headphone maker's recent earnings haven't been solid, to say the least. But its shares have seen support at the $5 level where yesterday's option activity was focused as traders look for a recovery by year's end.

(A version of this post appeared on InsideOptions Pro yesterday.)


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