Nuance faces range-bound trade
David Russell | firstname.lastname@example.org
optionMONSTER's tracking programs detected the sale of 2,000 March 25 calls for $0.65 and the purchase of an equal number of March 27 calls for $0.20. Volume was more than 7 times the previous open interest at each strike, showing that this is new positioning.
The trader collected a credit of $0.45, which he or she will keep as profit if the maker of speech-recognition software remains below $25 through expiration. Gains will erode above that level, with a maximum loss of $1.55 at or above $27.
While investors often sell calls against stocks they own, today's trade was probably done in isolation as a bet that NUAN will stay at its current level or decline. The March 27 calls in this case are used as a hedge to prevent big losses in the event of an unforeseen rally.
NUAN is down 0.12 percent to $24.20 today and has been sitting just below $25 for the last week. The company is scheduled to report earnings after the bell on Thursday, so today's trader apparently expects mediocre or weak numbers.
Total option volume is slightly above average in the name, with calls outnumbering puts by 65 to 1.