Options Trading News

August 7, 2012  Tue 11:46 AM CT

As Dow Chemical rallies off its lows, a large trade is betting on a floor beneath the shares.

DOW is up 0.87 percent to trade at $30.25, a week after hitting its 2012 low of $28.65. Shares have been trending lower from their 52-week high of $36.08 set in late April.

A trader sold 5,000 March 28 puts for the bid price of $2.08, according to optionMONSTER's systems. Open interest at the beginning of the day was just 358 contracts, so this is a new position.

The put seller apparently believes that thes stock will hold above $28 through expiration. The trader is looking to collect the so-called volatility premium but does face the possibility of having to buy the stock if its trades below that level. (See our Education section)
Share this article with your friends


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 »