Range-bound trade targets Seagate
Chris McKhann | [email protected]
STX is up 2.02 percent today to $25.05, continuing to rally since bouncing off support just below $22 a month ago. Shares of the computer hard-drive maker traded at a 52-week high of $32.55 at the start of May.
Seagate's total option volume of 39,000 is twice its daily average. A trader bought 9,300 August 25 calls for the ask price of $1.53 and, at the same time, sold 9,300 July 25 calls for the bid price of $1.03, according to optionMONSTER's systems. The volume at each strike was more than open interest, so this is a new calendar spread.
The strategy is designed to profit if STX is around that $25 strike price by expiration. The July options will decay more quickly than those in August.
The maximum risk in the trade is the debit of $0.50, at least up until the first expiration. That loss would be realized if shares have moved sharply in either direction by expiration. (See our Education section)