Babcox & Wilcox faces sideways trade
David Russell | email@example.com
optionMONSTER's tracking systems detected the sale of 2,500 August 25 puts for $1.50 and 2,500 August 25 calls for $1.25. Volume was above open interest at both strikes.
The trade resulted in a credit of $2.75, which the investor will get to keep if the industrial stock closes at $25 on expiration. Gains will erode on either side of that price, turning to losses below $22.25 and above $27.75.
BWC rose 2.04 percent to $24.69 in afternoon trading and has been trapped between $23 and $26 since the beginning of April. Known as a short straddle, today's option trade is designed to make money from the stock remaining in that range. (See our Education section for more on market-neutral strategies.)
Overall option volume in the company, which makes boilers for utilities and nuclear facilities, is 39 times greater than average so far in the session.