Options Trading News

December 4, 2012  Tue 2:15 AM CT

Shares of SanDisk have seen wild swings all year, but one trader apparently believes that the memory-chip maker will hold current levels for the next several months.

optionMONSTER's tracking systems detected the sale of 3,000 April 39 puts in a single print for $3.43. The volume was more than 9 times the strike's open interest of 330 contracts at the beginning of the day, clearly indicating that this is a new position.

SNDK rose 1.1 percent yesterday to close at $39.53. The stock began the year running to a 52-week high of $53.03 in January but then plunged to a low of $30.99 in the next four months amid rising concerns about the PC industry. Shares have recovered some of thoses losses and are now just above support going back to July.

Yesterday's put seller is looking for SNDK to be above the $39 strike price at expiration in mid-April next year. If the stock is below that level at that time, the trader faces the obligation to the buy shares, but at an effective price of $35.57 once the credit from the put sale is included.

Traders sometimes sell puts with the hope of purchasing the stock at a discount such as this. If the shares don't fall, they will not get the opportunity to buy them but can keep the premium as profit. (See our Education section)
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The art of trading

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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