Options Trading News

One investor is betting that Charles Schwab will stay range-bound in a long-term trade.

optionMONSTER's tracking programs detected the sale of 2,000 January 2014 12 puts for $1.60 and 2,000 January 2014 15 calls for $1.55. Volume was more than twice open interest at both strikes.

Known as a short strangle, the trade represents a long-term bet that the online-brokerage's stock will remain between $12 and $15 for the next 21 months. If it does, the trader will keep the credit of $3.15. Profits will erode outside of that level, turning to losses below $8.85 and above $18.15.

The strategy is market-neutral rather than directional, meaning it makes money from the passage of time rather than the shares rising or falling. (See our Education section)

SCHW fell 0.15 percent to $13.70 yesterday and has been staggering since the market crashed in late 2008. It had peaked around $19 last spring and bounced near $10.65 in December, so yesterday's trade appears to be looking for it to remain in a similar range.

Shares had rallied earlier it the year but have been stalling since then. Their 200-day moving average is also falling while the 100-day moving average is rising, which could make some chart watchers think that it's not trending up or down. The last earnings report on April 16 was lackluster as well.

The trade pushed total option volume in SCHW to more than twice the average amount.

Disclosure: Charles Schwab is a competitor of optionMONSTER's sister company, tradeMONSTER.