By Mike Yamamoto of OptionMonster
NEWQ YORK -- A large investor is betting that Restoration Hardware (RH) will resume its rally from last month.
OptionMonster's tracking systems detected the sale of more than 2,600 March 55s for $11.10 to $11.70 and the purchase of about 4,000 April 65 calls for $2.20. Volume was below the previous open interest in the nearer-dated contracts but above it in the later strike, indicating that an existing position was rolled forward.
The trader is closing the March calls, which expire at the end of next week, and is using the proceeds to buy a significantly larger position one month later at a strike that is $10 higher. The new long calls, which lock in the price where the stock can be purchased, are looking for gains by mid-April but will rapidly lose value if shares stall or decline in coming weeks.
The trade was explained by OptionMonster cofounder Jon "DRJ" Najarian on CNBC's "Fast Money" program on Tuesday.
Restoration Hardware's shares rose 0.98% to $65.70 on Tuesday. The home-improvement retailer rebounded from support around the $55 level in early February and ended the month near $68, but it has pulled back and drifted sideways since then.
Total option volume in the name Tuesday was 10 times its daily average for the last month. Overall calls outnumbered puts by 14 to 1.
Yamamoto has no positions in RH.