OptionsHouse

Options Trading News

February 22, 2013  Fri 2:45 AM CT

LCC: SEE CHART GET CHAIN FIND STRATEGIES
U.S. Airways has been testing long-term highs, but one investor thinks it may to come back to earth.

optionMONSTER's Depth Charge tracking program detected the purchase of 10,000 June 14 puts for $2 and the sale of an equal number of June 10 puts for $0.28. Volume was more than twice open interest at both strikes, indicating that new money was put to work.

Known as a bearish put spread, the trade cost $1.72 and will earn a maximum profit of 133 percent if the Arizona-based airline closes at or below $10 on expiration. The investor may be using the strategy as a hedge on an existing long position or as a speculative bearish play. (See our Education section)

LCC rose 0.3 percent to $13.37 yesterday. It rallied strongly through early this year, touching its highest levels since February 2008. But it then formed a potentially bearish "head and shoulders" pattern, with a lower high two weeks ago, which could be leading some chart watchers to expect a reversal lower.

Total option volume was twice the daily average in LCC yesterday, according to the Depth Charge, with puts accounting for a bearish two-thirds of the total.
Share this article with your friends


Invest Like a Monster - San Antonio: October 9-10

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »