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Coach call buyers bet on bounce

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A large trader is betting that Coach will rebound in the next month.

optionMONSTER's Heat Seeker system shows that 4,978 April 50 calls were bought in one print for the ask price of $1. This is clearly a new position, as the volume was well above the strike's previous open interest of 1,443 contracts.

These long calls lock in the price where the stock can be purchased through mid-April no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $50. (See our Education section)

COH rose 0.67 percent yesterday to close at $49.44, just below its 50-day moving average. The luxury retailer began the year above $56 but gapped down on a weak earnings report on Jan. 22 before bouncing near $44 in early February, it lowest level since October 2010.

Total option volume in the name topped 10,200 contracts yesterday, well above its daily average of 6,036 for the last month. Overall calls outpaced puts by a bullish 6-to-1 ratio.

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