Vitamin seller GNC Holdings is trading at 42.25 and has been on a tear rallying $30 this year alone.? The stock has earnings coming up on April 24th before the market opens.? The stock that trades by appointment (meaning rarely) had a customer set up a smart bullish play if one expects the stock to rally out of earnings but not explode.
The Trader bought 3,000 May 42.5 calls for 2.10 about a 48% IV and the sold 6,000 of the May 47.5 calls at 1.00 a 46% IV, a net debit of .10.? Both levels are elevated.? The trader will hit peak profit if GNC settles at 45.00 at May expiration.? If he is right on this play out of earnings though, his net debit could quickly turn into a nice net credit by the end of next week.
If GNC exceeds expectations by a lot the trader begins to lose money above 46.90.? This trade would be classified as a play of slight bullishness in GNC and bearishness on GNC IV levels.