Why trader sees Terex topping out
David Russell | firstname.lastname@example.org
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.