Options Trading News

January 17, 2013  Thu 4:14 AM CT

Seagate Technology has been rising steadily, and one investor apparently doesn't want to see those gains slip away.

optionMONSTER's Depth Charge tracking program detected the purchase of about 10,000 February 34 puts for $1.63 and the sale of an equal number of February 32 puts for $0.85. Volume was below open interest at the lower strike, which suggests that an existing position was closed and rolled higher.

The investor probably owns shares in the maker of computer hard drives, which is up 37 percent since the beginning of last month. Owning the puts hedges the stock position against a decline, and moving them to a higher strike enhances that protection. (See our Education section)

The trader has now locked in a minimum selling price of $34, up from the previous $32 strike. He or she paid an incremental $0.78 in return for that greater peace of mind.

STX fell 0.46 percent to $34.30 yesterday but remains near its previous high from late last summer.

Total option volume was triple the daily average in the session, with puts accounting for almost two-thirds of the activity.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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