Options Trading News

September 14, 2012  Fri 9:52 AM CT

Seagate Technology is seeing an interesting call spread as the stock trades in the middle of its recent range.

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.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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