Unusual upside bet on OCZ Technology

optionMONSTER

Shares of OCZ Technology have been crushed, but one investor is positioning for a violent rebound.

optionMONSTER's Heat Seeker tracking program detected the purchase of 3,000 December 8 calls for $0.25 and the sale of about 1,500 December 5 calls for $0.75. Volume was more than triple open interest at both strikes.

The trade appears to be an instance of a relatively rare strategy known as a backspread . It resulted in an initial credit of about $0.25 and will lose money as the stock pushes higher. But those losses will stop at $8 and turn to unlimited profits over $11--roughly the same level where the stock peaked one year ago.

OCZ fell 3.11 percent to $4.36 yesterday. The maker of solid-state computer hard drives rallied more than 400 percent between late 2010 and mid-2011 amid quick growth, but performance has worsened since then. It cratered this week after earnings and revenue missed expectations.

Yesterday's backspread could be a bet on an unexpected event, such as a takeover at a huge premium. (See our Education section for more on how options can be used to generate leverage.)

Almost 8,000 contracts traded in OCZ yesterday, triple the daily average. Calls outnumbered puts by 7 to 1.

More From optionMONSTER

Rates

View Comments (1)