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November 13, 2012  Tue 9:57 AM CT

SIAL: SEE CHART GET CHAIN FIND STRATEGIES
Sigma-Aldrich has been trapped in a range all year, but one trader sees a floor beneath shares of the life-sciences and technology company.

Dominating today's volume is a single print of 5,000 January 65 puts that was 10 times the total daily option average for SIAL. A trader sold the block for the bid price of $0.70 against previous open interest was 261, so it was a new opening position, according to optionMONSTER's systems.

The put selling is a bet that SIAL will remain above $65 though the beginning of next year. Below that level, the trader faces the obligation to buy shares at an effective price of $64.30 with the credit from the put sale. (See our Education section)

SIAL is up fractionally this morning at $70.12. It is bouncing off the low end of the range, as shares have been trading mostly between $68 and $74 going all the way back to early January. It did see its highest close of the year, just above $74, less than a month ago.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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