OptionsHouse

Options Trading News

November 11, 2013  Mon 3:16 AM CT

NCR: SEE CHART GET CHAIN FIND STRATEGIES
A large trader is looking for NCR to rebound after pulling back last month.

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.
Share this article with your friends


Invest Like a Monster - San Diego: June 26-27

Premium Services

Education & Strategy

Investor deficiency in premium collection

Most investors have heard about selling options as a form of income generation. You hear it from brokers and financial advisors as a way to generate income without selling off pieces of your nest egg, dwindling through your retirement accounts, and then being stuck figuring out how to financially afford the rest of your life...

View more education articles »