How trade is buying time for Xerox calls
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker tracking program detected the purchase of 38,000 October 9 calls for $0.26, and the sale of an equal number of July 9s for $0.09. Volume was below open interest in July but not October, indicating that an existing position was rolled from one contract to the other.
The trade cost $0.17 and gives the investor an additional three months for the slow-moving stock to rally. It also protects him or her from the accelerating pace of time decay that will occur in the July calls as expiration approaches. (See our Education section)
XRX rose 1.93 percent to $7.93 yesterday. The company's last earnings report on April 23 was better than expected, but the stock has remained trapped below its 200-day moving average since collapsing last August.
The shares have, nonetheless, been making incrementally higher lows, which could make some investors think they're headed higher at some point. That appears to be the rationale behind yesterday's activity.
Overall option volume was 12 times greater than average in the session, with calls outnumbering puts by 24 to 1.