Market News

January 3, 2013  Thu 9:05 AM CT

A short-term put spread tops the action in American International Group even as it trades near two-month highs.

A trader bought 2,550 January 36 puts for $0.38 and sold 5,100 January 35 puts for $0.14, according to optionMONSTER systems. This spread is in the new Weekly options for next week, so there was no open interest in either strike.

This put vertical cost $0.10 to open, which is the maximum at risk if AIG remains above $37. The maximum gain on this ratio spread would come if the stock is right at $36, while below that the trader is effectively long stock. (See our Education section)

AIG is up fractionally this morning at $36.53. Yesterday's close was the insurance giant's highest since Oct. 18, as shares have run up from support at $31 over the last six weeks.
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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