Andrea Kramer (akramer@sir-inc.com) Analysts at Morgan Keenan this morning launched coverage of Force Protection, Inc. (FRPT) with an "outperform" endorsement and a $6 price target. However, judging by today's activity in the options pits, some options speculators are betting the shares of the military manufacturer won't make it that far in the intermediate term.
Already today, FRPT has seen more than 10,000 calls cross the tape ? about 350 times its expected daily call volume. All but a handful of the contracts have centered on the equity's out-of-the-money March 6 call, which has seen 10,120 contracts change hands on open interest of fewer than 300, hinting at newly opened positions. However, the calls traded at the bid price, indicating they were likely sold.
By writing to open the March 6 calls, the sellers are essentially betting on intermediate-term resistance for the shares of FRPT. As long as the stock remains south of the $6 level through March options expiration, the written calls will expire worthless, and the sellers can pocket the entire premium received from the sale, which represents the maximum potential profit on the play.
At last check, the shares of FRPT have tacked on 1% to linger in the $5.12 region. However, the equity's upward trajectory could, in fact, run into a speed bump in the $6 area, thanks to an abundance of bullish bets. More specifically, the December 6 strike is home to more than 10,000 calls outstanding, which could exert options-related resistance in the short term.
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