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November 12, 2013  Tue 10:09 AM CT

TXN: SEE CHART GET CHAIN FIND STRATEGIES
A large trader is looking for a big move up or down in Texas Instruments.

optionMONSTER's Depth Charge system shows that 10,000 April 42 puts were bought for the ask price of $2.49. This is clearly a new position, as the previous open interest at that strike was just 237 contracts.

Just afterward, 510,000 shares of TXN were purchased for $41.85. Given the that the delta of the puts was -0.51, the combination of stock and options creates an overall position that is looking for a sharp move in either direction and/or for the actual volatility to be greater than that implied by the option price. (See our Education section)

TXN is up fractionally to $41.92 tihs morning. The chip maker has been trading around the $42 level for the last couple of weeks, the its best level since early 2001. Shares have been trending higher all year, with a 52-week low just above $28 last November.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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