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September 17, 2012  Mon 11:02 AM CT

EMC: SEE CHART GET CHAIN FIND STRATEGIES
A long-term spread is positioning for a limited pop in EMC.

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)
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When using the Stock Replacement Strategy, we must remember that in reality, we are doing a STOCK trade. We are just using options. We are replacing the stock position with an option position (long calls).

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