Options Trading News

May 6, 2011  Fri 12:21 PM CT

A wave of advertising money has driven CBS to its highest level in more than three years, and traders are writing options.

The strategy is a common response when investors remain positive on a stock but believe that its moves could be done for the time being. In the largest transaction, 10,000 September 23 puts were sold for $0.80 and 10,000 September 30 calls were sold for $0.80. Volume was more than twice open interest in both strikes.

CBS is down 0.11 percent to $26.69 in afternoon trading but still up about 90 percent since the end of last summer. The most recent push came this week, when earnings and revenue exceeded estimates.

Today's option trade, a short strangle, reflects an expectation that CBS will stay between $23 and $30 through expiration. Profit erodes outside of that range, but today's trade could be more complicated than that.

For instance, it could be the work of an investor who's ridden the stock higher. He or she is essentially agreeing to accept a maximum price of $30 if CBS keeps rising or to buy more shares at $23 if they fall. In return, they collected a credit of $1.60.

The transaction is an example of how traders can use options to manage existing positions or make money from the passage of time. (See our Education section)

Shortly after, 2,500 June 25 puts were sold for $0.50--a similar strategy as the strangle trade.

Overall option volume in CBS was 5 times greater than average so far in the session.
Share this article with your friends

Related Stories


Investors keep rolling with CBS

November 23, 2015


Bulls keep riding momentum in CBS

November 12, 2015

The media company has rebounded sharply in the last month, and traders apparently believe that the bullish momentum will continue through early next year.


Investor channels gains in CBS

November 2, 2015

The television and cable company, which has rebounded 18 percent in the last month, reports earnings tomorrow after the market closes.


Investor parlays winnings in CBS

October 29, 2015

The television network was hit hard along with other media companies in recent months but has been climbing off lows from late September.


Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »