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Is Skullcandy ready for a bounce?

Wednesday, 7 Aug 2013 | 5:22 AM ET
Metal Hammer Magazine | Getty Images

Skullcandy has struggled recently but saw bullish option activity yesterday.

OptionMonster's trade scanners show that chunks of December 5 calls were purchased for $0.55. More than 1,400 traded in volume well above the strike's previous open interest of just 47 contracts, indicating that this is fresh buying.

These calls lock in the price where shares can be bought, providing investors with a less expensive way to benefit from a rally without paying for the stock directly. They can generate some nice leverage in a rally while limiting losses if the stock drops.

Too much taper talk for stocks?
Stocks fell today on comments by Chicago Fed head Evans and Atlanta Fed chief Lockhart that tapering should start in September. John Rutledge, SAFANAD; Jack Bouroudjian, Bull and Bear Partners; and CNBC's Josh Lipton, discuss. "This QE is like watching a boa constrictor swallow an egg," says Rutledge.

Skullcandy ended the session down 1.17 percent to $5.07. Calls outpaced puts by 3,300 to 173, a reflection of the day's bullish sentiment. Total option volume in the name was 10 times greater than average.

The headphone maker's recent earnings haven't been solid, to say the least. But its shares have seen support at the $5 level where yesterday's option activity was focused as traders look for a recovery by year's end.

—By CNBC Contributor Pete Najarian

Additional news: Dr. Dre Is TakingSKUL to School

Additional views: Cramer: Frustrated you're not making more money?

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Disclosures:

Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com. Najarian has no positions in SKUL.

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