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How one investor is playing iStar

David Russell (david.russell@optionmonster.com)

Credit trends have been improving, and the bulls think that iStar Financial will benefit.

optionMONSTER's tracking systems detected the purchase of 2,500 January 12 calls for $1.15 and the sale of 3,000 April 13 calls for $0.925. Volume was below open interest in the January contracts, indicating that an existing short position was closed and rolled forward in time.

There was heavy buying in the shares around the same time, so it appears that a bullish covered-call strategy was at play. The investor probably owned about 250,000 shares and had sold the January 12 calls against them to earn income and manage risk.

He or she then rolled that position forward in time, increased its size, and apparently bought more stock. That increased the stake in the commercial-mortgage company and raised the exit price by $1. The adjustment also keeps the investor in the name for an additional three months. (See our Education section)

SFI rose 3.09 percent to $12.67 yesterday but remains well below the $50 price it commanded before the 2008 credit crisis. The stock has been slowly working its way back from the crash, but it still trades for less than 0.8 times book value.

Other financials such as Bank of America and MGIC Investment, which also trade well below their pre-crash highs, have been rallying in the last week after citing lower delinquencies on loans. SFI reports quarterly results on Oct. 29, so traders may be looking for strong numbers as well.

Total option volume was 36 times greater than average in the session.

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