LeapFrog Enterprises fell sharply last week as the rest of the market rallied, but one trader appears to be looking for the stock to make a comeback in the next six weeks.
More than 2,500 October 12.50 calls traded with a bullish bias within about 7 minutes on Friday morning, led by a single print of 2,269 that went for $0.20, according to optionMONSTER's Heat Seeker tracking program. Open interest in the strike at the beginning of the session was a mere 86 contracts, indicating that this was a new position.
LF has tripled in the last year but dropped 8.86 percent to $9.15 on Friday, its lowest close since May 3. Shares of the company, which makes multimedia learning devices such as the LeapPad children's tablet, have plunged from above $11 in just the last seven sessions after the disclosure that a director had sold 50,000 shares.
If the long calls purchased on Friday are held until expiration in mid-October, the stock would need to be above $12.70 for them to be profitable. But premiums on those contracts could rise before that time, allowing the trader to sell the calls at a profit before then. If no rally occurs, the calls will expire worthless.
Overall option volume in the name totaled 7,168 contracts, about 20 times its daily average. Calls outpaced puts by 6 to 1, a reflection of the bullish sentiment.
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