Large trade bets on NCR rebound
David Russell | [email protected]
optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 39 calls for $1.20 and the sale of an equal number of January 33 puts for $0.90. Volume was more than 10 times open interest at both strikes, indicating that new bets were placed.
Owning calls locks in the price where a stock can be purchased, while selling puts generates income but creates an obligation to buy in the event of a pullback. Combining the two strategies produces a highly leveraged long position. (See our Education section)
The trader paid just $0.30 and stands to earn huge profits if the maker of bank-teller machines and cash registers pushes above $39.30 on expiration. He or she also faces losses on a drop below $33. If the stock remains between those two levels through mid-January, the position will expire worthless.
NCR rose 2.87 percent to $36.54 on Friday. It's up 43 percent so far this year but is down 8 percent in the last month after quarterly revenue missed expectations on Oct. 24.
The shares are now attempting to stabilize near their 100-day moving average. They also peaked around $33 in June, which could make some chart watchers comfortable writing puts at that level.
Total option volume was 6 times greater than average in the session, according to the Heat Seeker.