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Options Trading News

February 19, 2013  Tue 11:03 AM CT

COF: SEE CHART GET CHAIN FIND STRATEGIES
Capital One is trading lower again today, but a big three-way spread is looking for a bounce.

optionMONSTER systems show that a trader sold 5,000 January 50 puts for the bid price of $4.20 against open interest of more than 10,000 contracts. Seconds later he or she bought 5,000 January 55 calls for $4.50 and then sold 5,000 January 70 calls for the bid price of $0.70. The volume at the two calls strikes was more than 5 times the previous open interest, indicating that this is a new call spread.

This bullish action could be the work of a trader who is changing views, closing long puts and putting most of the money into a call vertical. But this is more likely an opening three-way play, with the trader using the put sale to more than offset the cost of the call spread.

The latter scenario would take on the risk of buying shares if they are below $50 but would have a credit if shares remain where they are and would generate a healthy profit if they bounce above $70. (See our Education section)

COF is down 0.85 percent to $53.57, its lowest level since July. The bank-holding company was above $56 on Friday and above $62 a month ago, before its last earnings report.

Almost 20,000 COF options have changed hands so far today, compared to a daily average of 6,400 over the last month.

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