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December 9, 2011  Fri 11:46 AM CT

LDK: SEE CHART GET CHAIN FIND STRATEGIES
A huge put trade dominates the option activity in LDK Solar today as its shares take a pause from their recent gains.

LDK is down 1.52 percent at $4.54 but is still in its range from yesterday, when it opened at $4.22. Shares of the Chinese solar-technology company have been gaining essentially every day for the last three weeks since bouncing off a low of $2.57.

Option volume in the name already tops 86,000 contracts so far today, compared with its full-day average of 17,000. The big trade involved 24,800 each of the December 5 puts and March 3 puts.

The Decembers were sold for $0.76 against open interest of 41,495. The March contracts were bought for $0.81 with volume that was well more than open interest, so this side of trade was clearly done to open a position.

The overall trade is very likely rolling a position to March from December contracts as expiration in the latter is just a week away. The trader exchanges those in-the-money expiring puts for some that are well out-of the money but needs to spend $0.05 only to get more time for the strategy to work.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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