Options Trading News

October 5, 2012  Fri 1:47 AM CT

Motorola Solutions has paused after breaking out last month, but one trader is betting that the stock won't return to its recent lows.

A trader sold 5,000 October 46 puts in a single print for $0.08, optionMONSTER's tracking systems show. The volume dwarfed open interest in the strike of just 917 contracts at the start of the session, clearly indication a new position.

Shares of the company, which makes devices such as police radios, barcode scanners, and wireless-networking equipment, rose 0.35 percent to close at $51.08 yesterday. MSI ran up from below $45 in mid-July but pulled back after hitting multi-month resistance near $52 on Sept. 21, and the stock has been trading sideways since.

Yesterday's put seller apparently believes that MSI will be above the $46 strike price at expiration in two weeks. If the shares are below that level, the trader will likely be required to buy the stock at an effective price of $45.92 once the credit from the put sale is factored in. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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