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May 30, 2013  Thu 2:14 AM CT

FITB: SEE CHART GET CHAIN FIND STRATEGIES
One trader apparently thinks that Fifth Third Bancorp is going nowhere in a hurry.

optionMONSTER's tracking programs detected the sale of 16,150 August 18 puts for $0.50 and 16,150 August 18 calls for $0.89. Volume was more than triple open interest at each strike, indicating that new positions were initiated.

The investor collected a credit of $1.39 and is placing a huge bet that the Cincinnati lender will stay close to $18 through expiration three months from now. He or she will keep the entire premium as profit if the stock closes at that exact level, with gains eroding above and below. The trade will lose money with shares above $19.39 or below $16.61.

Known as a short straddle, the trade is an example of a market-neutral strategy that makes money from the passage of time rather than a directional move. (See our Education section)

FITB rose 0.22 percent to $18.47 yesterday. Although the stock has gained more than 20 percent this year, it's now stalling around the same price range where it swung wildly on the eve of the 2008 market crash. That could make some chart watchers expect it to face resistance in the near term.

Total option volume was 22 times greater than average in the session.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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