Bullish strategy targets Equity Residential
Equity Residential has gone nowhere for years, but traders are looking for that to change.
optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,861 October 55 calls, most of which priced for $2.83, and the sale of a matching number of October 52.50 puts for $2.38. Volume was more than 150 times open interest at both strikes, indicating that new a position was initiated.
The trade cost $0.45 to open and is similar to owning shares in the Chicago real-estate firm. The calls owned will appreciate in value if EQR rallies and the puts sold short will dwindle, while the opposite will happen to the downside.
The benefit of the strategy is its low cost compared with buying the common equity. He or she is apparently be willing to buy shares for $52.50 if they close below that level on expiration. The stock hasn't traded that low since November 2011.
EQR fell 0.03 percent to $54.38 in afternoon trading. It more than tripled between early 2009 and mid-2011, but has been trapped in a range between $50 and about $65 ever since.
Today's bullish strategy pushed total option volume to 7 times greater than average in the session, according to Heat Seeker.
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