Options Trading News

January 9, 2013  Wed 9:11 AM CT

A large put strategy dominates today's option trading in MetroPCS Communications as shares gain on the day.

optionMONSTER systems show that 15,000 PCS options have traded, compared to a daily average of 3,500 in the last month. Virtually all of that action was in a three-way put spread.

A trader sold 5,000 January 11 puts for the bid price of $1.50 against open interest of more than 47,000 contracts. Second later he or she bought 5,000 May 10 puts for $1.17 and then sold 5,000 May 8 puts for the bid price of $0.22. The volume at these two strikes was under 700, so that is a new vertical spread.

The trader is closing the in-the-money January puts and rolling the position to the lower strikes in the May spread. He or she takes a profit on the roll, and the $0.95 spent on the $2 spread in May was $0.44 in the money itself. (See our Education section)

PCS is up 2 percent to $9.53. Yesterday's close of $9.33 was its lowest since mid-August. Shares of the wireless carrier traded above $14 briefly at the start of October but have been sliding since.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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