OptionsHouse

Options Trading News

November 28, 2012  Wed 2:45 AM CT

TEX: SEE CHART GET CHAIN FIND STRATEGIES
Terex has bounced, and one investor thinks that the next move will be lower.

optionMONSTER's Depth Charge tracking program detected the purchase of about 2,730 December 22 puts for $0.42 and the sale of an equal number of December 26 calls for $0.36. Volume was more than twice open interest at both strikes.

The investor paid $0.06 and stands to make money from the industrial stock pushing lower. He or she probably owns shares and is using the options as a hedge. If TEX goes back to $26, they'll be forced to sell, while below $22 they will make money on the puts. (See more on collar trades here)

That $26 level is roughly where the stock peaked several times this year, which could make some chart watchers consider it resistance.

TEX fell 1.91 percent to $23.87 yesterday. It almost doubled between late July and mid-September but has been trapped in a range since then. The company, whose products include cranes and heavy trucks, reported a string of very strong quarterly results until October, when slowing construction caused revenue to miss consensus.

Yesterday's collar pushed total option volume in the name to 7 times greater than average, according to the Depth Charge.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

How to Defend Your Portfolio and Profit in a Market Selloff

http://bit.ly/1OSMWU6

Jon Najarian and Sandy Chaikin of Chaikin Analytics demonstrate how to play defense when the market is selling off. And, how to turn misery into money, whether investing in stocks or trading options.

Education & Strategy

The sweet spot

When using the Stock Replacement Strategy, we must remember that in reality, we are doing a STOCK trade. We are just using options. We are replacing the stock position with an option position (long calls).

View more education articles »