OptionsHouse

Options Trading News

November 5, 2012  Mon 12:07 PM CT

AIG: SEE CHART GET CHAIN FIND STRATEGIES
One investor is looking for more downside in American International Group, which has been dropping for the last three weeks.

optionMONSTER's Depth Charge monitoring system detected the purchase of 10,000 February 30 puts for $0.94, which will appreciate rapidly if the insurance giant continues to decline. The trader also sold 10,000 February 34 calls for $1.44 and bought 10,000 February 38 calls for $0.44 with volume exceeding open interest at all three strikes.

Selling the 34s generated income to finance buying the 30s, while owning the 38s limits the amount of money that can be lost if the stock rallies. The net result is that the trader collected a credit of $0.06. He or she now stands to earn infinite profits if AIG goes below $30 and can lose a maximum of $4 at or above $38.

AIG is up 0.31 percent to $32.78 in early afternoon trading and has lost 11 percent of its value since Oct. 18. The company's last earnings report beat expectations, but management dampened enthusiasm by saying it will focus attention on its credit profile rather than redistributing capital to shareholders.

Today's three-way trade has accounted for more than a third of AIG's options so far today and pushed total activity in the name to almost twice its daily average.
Share this article with your friends


Related Stories

AIG

Why one trader is selling puts in AIG

May 31, 2016

The insurance giant is up 13 percent in the last three months, and a large trader apparently believes that shares will hold their ground this week.

OptionsHouse

Premium Services

Education & Strategy

The Movement of Delta

In our last column, we spoke about delta. You might remember that we discussed what delta was and what factors affected or changed delta. As you recall, we stated that three factors will have an effect on delta. They were movements of time, volatility, and underlying price. Today, we want to take a further look into the change of delta, this time focusing on change due to the movement in the underlying price. 

View more education articles »