FIG – Fortress Investment Group, LLC – The asset management firm popped up on our ‘hot by options volume’ market scanner in the first half of the trading session after one investor enacted a large-volume bullish transaction in the January 2012 contract. FIG’s shares rallied nearly 1.5% to $4.15 just before 12:25 pm ET. The trader appears to have essentially financed the purchase of in-the-money calls by selling a straddle. It looks like the investor purchased 12,300 deep in-the-money calls at the January 2012 $2.5 strike at a premium of $2.20 each, sold 12,300 calls at the higher January 2012 $5.0 strike for a premium of $0.75 apiece, and shed 12,300 in-the-money puts at the January 2012 $5.0 strike for a premium of $1.50 each. The spread yields a net credit of $0.05 per contract to the investor. The trade positions the responsible party to amass maximum potential profits of $2.55 per contract – including the net credit of $0.05 received on the transaction – as long as Fortress Investment Group’s shares rally 20.5% over the current price of $4.15 to exceed $5.00 by expiration day in 2012.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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