Smith & Wesson has been shooting higher, and one investor is gunning for more upside.
optionMONSTER's tracking systems detected the purchase of 1,375 February 5 calls for $0.35 against existing open interest. An equal number of September 6 calls were sold at the same time for $0.50.
The transaction was probably the work of an investor who owns shares in the firearms company and has been using the options as part of a covered call trade. The strategy hedges risk and reduces volatility while limiting potential gains. (See our Education section)
In the case of this morning's activity, the short calls were rolled to the higher strike. That raised by $1 the level at which they must sell their shares. He or she also collected a $0.15 credit and agreed to remain in the position for an additional seven months.
SWHC is off 0.19 percent to $5.30 in morning trading but is up about 75 percent in the last three months. The company recently divested a security business and is now back to focusing entirely on handguns and rifles. Its last earnings report on Dec. 8 showed strength in that core business.
Rival Sturm Ruger has also met with rapid growth as the public anticipates increased gun-control laws from Washington.
Overall option volume in SWHC is 10 times greater than average so far today.
More From optionMONSTER
European stocks rose for a third straight session on Monday and the euro bounced back from two-year lows, as Greek …
There are no comments yet