A large trader apparently believe that Etsy will break out of its recent range by the spring.
Our tracking program detected the sale of 4,100 March 15 calls mostly for $0.35 to $0.38 below open interest of 12,039 contracts and the purchase of 4,100 March 12.50 calls for $0.99 to $1.03 against open interest of 747 contracts. The investor could either be rolling the March 15s to the lower strike, as their volume is below open interest, or opening a new vertical spread. Either trade is bullish.
Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction.
If this is a vertical spread , the investor is looking for ETSY to rally above $12 by expiration. The sale of the higher-strike contracts reduces the cost of the long calls but limits potential gains, as the trader will be obligated to sell shares if they rise above $15. (See our Education section)
ETSY fell 0.93 percent to $11.76 yesterday and is down 20 percent in the last three months, but shares have been trading in an increasingly narrow range in the last several weeks. The online crafts marketplace reported bearish quarterly numbers on Nov. 1 and is expected to announce its next earnings results after the close on Feb. 23.
Overall option volume was 9 times greater than average in the name yesterday. Calls outnumbered puts by a bullish 104-to-1 ratio.
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