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Monday, January 3, 2011

Big options bet on Whirlpool (WHR)

The following site is one of my favs - spotted a large institutional bet on Whirlpool (WHR), the household appliance maker.

The investor is looking for much more upside within the next two months, using February options to put on on a butterfly or wingspread.  The maximum gain is the difference between the wing and body, or $10, less what they paid, $1.50 - potential net of $8.50 per spread.   The maximum gain is realized if the stock price closes at $105 by expiration.  The max loss is what was paid for the spread, $1.50.  As one can see, the spread offers a nice risk/reward ratio.  

The chart is bullish, with shares consolidating for two weeks for the next leg higher.  Through resistance at $91, the next resistance lies at $95.80 and then $105, the intended target.   The chart is bullish and options activity such as this spread indicates the big boys agree!

The company reports on 2/2 before the bell and there recently has been renewed takeover chatter.