Fortress Pullback Brings Out the Bulls
Fortress Investment pulled back yesterday, and the bulls piled in.
OptionMonster's trade scanners detected the purchase of 2,200 September 6 calls for $1.25 to $1.40. The volume exceeded the strike's previous open interest of 1,438 contracts, indicating that new positions were implemented.
The investor now has the right to buy shares in the hedge-fund/private-equity company for $6 through expiration. The cheapness of the calls relative to the stock limits the amount of capital at risk and creates the possibility of significant leverage in the event of a rally. For instance, a 25 percent gain would more than double the value of the options.
Fortress was unchanged when the trade hit, but it ended the session up 1.84 percent to $7.18. It's been riding a wave of bullish sentiment toward the broader market and also benefits from owning a large slug of high-flier Nationstar Mortgage.
Total option volume was twice the daily average yesterday, with calls outnumbering puts by more than 10 to 1.
—By CNBC Contributor David Russell
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in FIG.