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Bulls go shopping at Ross Stores

David Russell (david.russell@optionmonster.com)

Ross Stores has pulled back to a key level, and some traders apprently think that the discount retailer is on sale.

optionMONSTER's Heat Seeker monitoring program detected the purchase of almost 1,600 November 50 calls for $3.70 to $4. Volume was more than 7 times open interest at the strike.

Those long calls have locked in a $50 purchase price on ROST, effective at the end of today's session. Including the cost of the options, their cost will be about $53.70, almost exactly the same as where the stock was trading at the time.

Using options instead of shares, however, reduces risk. For instance, if the market were to continue tumbling into the afternoon and the stock falls below $50, those calls would become worthless and would lose only the $3.70 to $4 outlay.

If they were to buy common equity, however, they would face losses from above $53 all the way down. (See our Education section for more on how options can be used to manage risk.)

ROST is down 1.18 percent to $53.80 in afternoon trading. It peaked around $70 in August, then rolled over and has been falling since. The stock is now back near a level where it consolidated in January and February, which could be leading some chart watchers to expect a bounce.

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