Goodyear Sees Huge Upside Bets

By David Russell of OptionMonster
 
NEW YORK -- Goodyear Tire & Rubber GT pushed to new highs Thursday, and the options activity was extreme.
 
The unusual volume hit early and hit often in the company, starting with January 25 calls and the January 25.50 calls. OptionMonster's tracking systems show that the 25s were purchased for 45 cents and the 25.50s fetched 25 cents. More than 4,000 contracts traded in each during the first 30 minutes of trading.
 
Buyers returned in the afternoon, snapping up more than 6,000 February 26s for 95 cents to $1 and almost 8,000 January 23s for $2.25 to $2.40. Such long calls lock in the price where a stock can be purchased, letting investors cheaply leverage modest gains in the underlying price.
 
In the largest transaction of the day, an investor bought 15,000 July 27 calls for $1.85 and sold 15,000 July 31s for 70 cents. Known as a vertical call spread, the strategy will leverage a $1.15 bet into a potential $4 windfall if the shares close at or above $31 on expiration.
 
Goodyear shares rose 2.06% to $25.22 Thursday and are up 12% in the last month. The stock almost doubled between April and September, pulled back and has been climbing since early November. It's now back to levels last seen in mid-2008.
 
Earnings will probably be released in the first half of February based on last year's calendar, although the date hasn't yet been announced.
 
Total option volume was 23 times greater than average in the session, with calls outnumbering puts by a bullish 30-to-1 ratio.
 
Russell has no positions in GT.

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.

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