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December 6, 2012  Thu 12:20 PM CT

TIBX: SEE CHART GET CHAIN FIND STRATEGIES
Tibco Software got crushed yesterday, but one investor is looking for a rebound.

optionMONSTER's Heat Seeker trade scanner detected the purchase of 1,400 May 25 calls for $1.05. Equal-sized blocks were sold at the same time in the May 28 calls for $0.40 and the May 29 calls for $0.20. Volume was below open interest in the May 29s, so there are two possible explanations for the trade.

One is that the investor previously owned the May 29s and rolled the position down to the lower strike after yesterday's selloff. He or she then sold the May 28s to reduce their cost, setting them up for a bounce above $25. (See the discussion of vertical spreads in our Education section)

The other possibility is that all three contracts were opened. In that event, the trade was a "Christmas tree" spread at a cost of $0.45. It would earn a maximum profit of 1,011 percent if the stock closes between $25 and $26 on expiration. Gains would erode above that range and turn to losses over $31.

TIBX is up 1.5 percent to $20.30 in afternoon trading. The business software company fell yesterday after predicting fourth-quarter results would miss consensus estimates and is now trying to bounce around its lowest level since September 2011.

Total option volume is triple the daily average so far today, with calls outnumbering puts by 20 to 1.
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Education & Strategy

Gamma

As we continue to discuss the Greeks, we come to the first of the strike based Greeks called Gamma. Gamma is known as the second derivative, while delta is the first.

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