Unusual bullish strategy in DuPont
David Russell | [email protected]
Our Heat Seeker monitoring program detected the sale of about 15,000 October 50 puts for $0.95 and the purchase of a similar number of July 57.50 calls for $1.06. Volume exceeded the previous open interest at each strike, indicating that new money was put to work.
The trade cost just $0.11 to open and will profit from the chemicals giant continuing to rally in the next two months. The investor also made a longer-term commitment in the next five months to buy the stock for $50 if it drops below that level.
Selling puts in longer-dated contracts reaped additional premium from the greater time value, letting the investor select a strike that was much further out of the money than the calls. The $50 level is also roughly where the peaked in March and April, which could be leading some chart watchers to believe that it will now provide support. (See our Education section)
DD is off fractionally at $56.35 this morning but is up 20 percent in the last three months. It's near the same $57 area that's held the shares in check for more than a decade. Traders may expect a major rally if that resistance is broken.
Total option volume is more than twice the daily average in DD so far today, according to the Heat Seeker.