What's behind call action in Seagate
Chris McKhann | firstname.lastname@example.org
STX is down 1.11 percent to $29.98 after trading as high as $31.50 this morning. Shares have come off an all-time high of $35.71 set last month and are now back to where they were at the start of August. The computer hard-drive maker was at a 52-week low of $9.05 last October.
optionMONSTER's systems show that the trade involved 5,000 September 31 calls for $0.22 and 5,000 September 30.50 calls for $0.51. The latter volume was a bit less than open interest, so it could have been a closing transaction.
This could be a simple roll higher, with the trader closing the in-the-money calls and rolling the position up to another strike that is just out of the money. It could also be a new call spread. (See our Education section)
The interesting thing here is the cost and the use of the new $0.50 strikes. The spread would have cost $0.29, but the stock at the time of the trade was $30.82.
So the spread was below parity as the $30.50 strike was $0.32 in the money. In other words, if the spread was purchased, the trader could make money, though clearly a very small amount, even if the stock doesn't move higher.