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Options Position for a Pop at Talbots

Shares of Talbots rose sharply for the second straight session yesterday along with upside options activity after FBR Capital Markets raised its price target on the women's apparel company by more than 60 percent.

TLB ended the session up 16.53 percent to $11.14 in afternoon trading on more than six times the average stock volume, following a a 7.4 pop Tuesday. The shares, which hit $1.19 at the depths of the financial crisis last November, have spiked more than 30 percent since only Friday.

Options activity was concentrated at the November 12.50 contracts, where 2,243 calls traded in a strong buying pattern. Most of them were purchased for the asking prices of $0.65 to $0.90, according to OptionMonster's real-time systems.

The retailer averages just 10 calls traded daily at the strike, where the open interest of only 179 contracts indicated that yesterday's trading represented newly opened positions. The purchased calls would profit only if the stock rises at least 18 percent to 20 percent by the time they expire on Nov. 20.

Talbots has struggled more than many competitors as it has tried to recover. But it got a much-needed boost this morning when FBR Capital raised its price target for the stock to $13 from $8 and reiterated its "outperform" rating on the stock.

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Mike Yamamoto is an analyst and writer for OptionMonster.

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