Learn the trade here. Make it on tradeMONSTER

Options Trading News

December 28, 2012  Fri 3:16 AM CT

DOW: SEE CHART GET CHAIN FIND STRATEGIES
A bearish spread targeted Dow Chemical yesterday as its shares held near resistance.

optionMONSTER systems show that a trader bought 2,500 February 20 puts for the ask price of $0.69 and sold 5,000 February 28 puts for $0.33. The volume at both strikes was significantly higher than the previous open interest, so this is a new vertical spread.

It cost only $0.03 to open the trade, which is also known as a ratio spread because one strike has twice the volume of the other. The position takes a maximum profit if shares are right around $28 upon expiration in mid-February. If the stock is below that level, the trader faces assignment on the additional short puts and the obligation to buy shares. (See our Education section)

DOW fell 0.93 percent yesterday to close at $32.12. The stock hit a 52-week low under $28 in mid-November but last week tested resistance at $33, its highest level since June.
Share this article with your friends


Related Stories

DOW

Dow Chemical bulls look for rally

September 26, 2014

The chemical company has been holding key support, and yesterday traders positioned for a rally with heavy call buying across several strikes.

Premium Services

Free Webinars

How Can Equity Traders Beat the Algos

Education & Strategy

When to go in or out of the money

Some of our subscribers recently asked how to gauge positions that are in or out of the money, so I...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER