How long-term trade is playing EMC
Chris McKhann | [email protected]
EMC is down fractionally today, trading at $27.65. Friday's close was the highest since the start of May for the data-storage company.
A trader bought 5,600 of the January 2014 30 puts for $5.26 and, at the same time, sold the same number of the January 2013 30 puts for $3.17. The volume at each strikes was more than open interest, so this is a new calendar spread.
The position is designed to profit from the increased time decay of the nearer-term options. The trader is essentially betting that EMC will be around $30 at the start of next year.
The trade cost $2.09, which is at risk if shares move too far in either direction away from $30. (See our Education section)