When it comes to making big money in the stock markets, it’s not what you know, it’s who you know. Take Monro Muffler Brake Inc (MNRO). On Tuesday, one “smart” trader (that’s code for someone with insider knowledge of corporate events) bought a whopping 2,000 contracts of the MNRO Jan18 $55 calls, paying at $1.025 at the ask. That one trade accounted for over 10 times the normal options volume in Monro Muffler Brake Inc (MNRO). That’s a conviction trade right? ( but of course, the investor will very likely never be convicted of trading on insider knowledge).
But the unusual options action didn’t stop there. Yesterday, Wednesday July 19, a trader (the same one?) opened a call spread in Monro Muffler Brake Inc (MNRO) with 1500 contracts of the JAN18 $55/$65 calls.
So what did this person with insider knowledge know before the rest of the poor, non connected, folk? Well, this morning we found out (much too late, of course). This morning at 7:30 am Monro Muffler Brake Inc (MNRO) announced their first quarter earnings, and wouldn’t you guess, they were stellar!? You can read the MNRO earnings release here.
First quarter sales increased 18%
EPS up 3 cents over last years quarter
Adjusts Guidance to 2.05 to 2.20 for the whole year.
Announces the purchase of 20 stores with sales of $13 million
Naturally, investors liked this upbeat earnings report. And the insider trading guy loved the results even more. Monro Muffler Brake Inc (MNRO) stock opened up much higher, trading as high as $47.95 earlier this morning. It is currently at $45.60, up $3.20 over yesterdays close. Clearly the insider expected, or still expects, more upside, given the $55 calls. However they did make out alright so far, as those MNRO $55 calls are currently $1.90 to $2.40, last trade at $2.23, for a nice double. At least on paper, as that big option buyer hasn’t unloaded them as of yet. So, is there more upside to come? I would guess yes. But we’ll have to wait and see.