Market News

September 17, 2013  Tue 2:45 AM CT

Implied volatility has been rising in Mindray Medical, and one trader is selling calls to exploit the trend.

optionMONSTER's monitoring systems detected a trade in the January 50 calls, with 2,500 contracts changing hands against previous open interest of just 209. The trader fetched $1.30, much closer to the $1.15 bid price than to the $1.60 ask price, indicating that the contracts were sold.

Selling calls obligates the investor to unload shares in the Chinese medical-device company for the strike price if they're above that level on expiration. Below it, he or she will keep the $1.15 as the options will expire worthless.

The trader probably owns MR shares and would be willing to let them go for $50 because that price is well above current levels. Implied volatility has also been climbing and now stands around 50 percent, which increases the value of the calls. (See our Education section for more on how to earn money from the passage of time with options.)

MR rose 1.45 percent to $42.05 yesterday. The shares are up 10 percent in the last six months and are back around the same $40-$45 range where they peaked in 2007 and 2008.

The call selling pushed total option volume to twice the daily average in yesterday's session.
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