Fortress Pullback Brings Out the Bulls

By David Russell, reporter at OptionMonster

NEW YORK -- Fortress Investment ( FIG) pulled back Thursday and the bulls piled in.

OptionMonster's trade scanners detected the purchase of 2,200 September 6 calls for $1.25 to $1.40. The volume exceeded the strike's previous open interest of 1,438 contracts, indicating that new positions were implemented.

The investor now has the right to buy shares in the hedge-fund/private-equity company for $6 through expiration. The cheapness of the calls relative to the stock limits the amount of capital at risk and creates the possibility of significant leverage in the event of a rally. For instance, a 25% gain would more than double the value of the options.

The stock price was unchanged when the trade hit, but it ended the session up 1.84% to $7.18. It's been riding a wave of bullish sentiment toward the broader market and also benefits from owning a large slug of high-flier Nationstar Mortgage.

Total option volume was twice the daily average Thursday, with calls outnumbering puts by more than 10 to 1.

Russell has no positions in FIG.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

If you liked this article you might like

UniCredit Rises After Sealing $20 Billion Bad Loan Deal With Fortress and PIMCO

Italy's Monte dei Paschi Faces Uncertain Future After Two U.S. Funds Bail on Bailout

Asia's Buffett 'Gets' Tech as He Transforms Softbank

T-Mobile, Dish, Comcast and AT&T Among Top Spenders in FCC Wireless Spectrum Auction

Amundi Launches Cash Call to Fund Deal to Buy Pioneer from UniCredit