OptionsHouse

Options Trading News

March 8, 2013  Fri 2:45 AM CT

STLD: SEE CHART GET CHAIN FIND STRATEGIES
One big investor apparently believes that Steel Dynamics may be ready for a pullback.

optionMONSTER's Depth Charge monitoring program detected the purchase of 5,000 August 14 puts for about $0.83 and the sale of an equal number of August 18 calls for $0.40. Volume was more than 13 times open interest at each strike, clearly showing that this is new activity.

He or she probably owns shares in the steel maker, which is up 21 percent in the last three months. Buying the puts protects against a drop, while writing the calls reduced the price of that insurance. It also forces the trader to sell the stock for $18 if it closes above that level on expiration in mid-August.

Including the net cost of $0.43, the minimum exit price will be $13.57 and the maximum will be $18.43. (For more on this strategy, known as a collar, click here.)

STLD rose 0.26 percent to $15.49 yesterday and is hovering around a level where it peaked early last year. That could be leading some chart watchers to think that it's at resistance and poised for a drop.

The collar pushed total option volume to 11.5 times greater than average in the session, according to the Depth Charge.

Share this article with your friends


Related Stories

STLD

Bull is rolling for more in Steel Dynamics

April 25, 2016

The steel company has rallied 55 percent in the last three months, and one investor is looking for even more gains in coming weeks.

STLD

Big trader rolling with Steel Dynamics

April 12, 2016

The steel company is up 33 percent in the last three months, and one large trader is looking for more gains by rolling calls forward.

OptionsHouse

Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »