Complex 3-way trade in Schlumberger
Chris McKhann | firstname.lastname@example.org
SLB is up 2.78 percent to $61.33 after it seeing its lowest close since October yesterday. Shares of the oil and gas company were trading above $80 in late February.
More than 65,000 SLB options have changed hands already today, compared to a daily average of 17,000. Most of the volume is in a three-way spread. A trader bought 10,000 August 60 calls for $3.81, sold 15,000 August 65 calls for the bid price of $1.55, and sold 15,000 August 5 puts for $1.24. The volume was more than open interest at all three strikes.
This spread uses the sale of the puts and a greater number of higher-strike calls to offset the cost of the August 60 calls. The position takes a maximum profit if SLB trades up to $65 by expiration but does carry the risk of short shares above that level and long shares below $55. (See our Education section)