Options Trading News

January 17, 2013  Thu 3:47 AM CT

Companhia Siderurgica Nacional fell yesterday, but one trader believes that the Brazilian steel maker will hold above a key level this year.

optionMONSTER systems show that 11,418 SID options changed hands yesterday, compared to a daily average of just 1,000, led by the sale of 4,000 January 2014 5 puts for $0.65. The trade's volume was twice the previous open interest at that strike, clearly indicating a new position.

This put selling is a bet that SID will remain above the $5 strike price by expiration in a year. The trader would also face the obligation to buy shares if they are above that level at that time, but at an effective price of $4.35 when the credit from the put sale is factored in.

SID declined 3.26 yesterday to close at $5.94, just below its 200-day moving average. The shares were above $10 last February but traded below $5 through November.
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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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