Options Trading News

Tyco is seeing heavy option activity as its shares continue to fall.

TYC is down 2.39 percent at $51.89, falling to its lowest levels since March 7. The industrial conglomerate had climbed as high as $57.75 at the end of April.

More than 27,000 TYC options have already changed hands today, compared to a daily average of 1,300 in the last month. This volume is wrapped up in two distinct combination trades, the first of them in July.  

optionMONSTER's systems show that a trader bought 5,000 July 49 puts in two blocks, the larger for the ask price of $1.44. At corresponding times he or she sold 5,000 July 55 calls, the biggest for the bid price of $0.81, at volume that was less than open interest.

This combination is quite likely a collar against long stock. That position would look to protect shares against a continued pullback but allow for some upside.

Our systems detected the next combination trade about 20 minutes later in the October options. . A trader bought 3,000 October 52.50 calls for $3.55 while selling the same number of October 57.50 calls for $1.27 and October 47 puts for $1.98. The volume at all three strikes was more than open interest.

This latter combination is bullish up to that $57.50 strike price and loses the small debit if TYC remains between $47 and $52.50. Below $47 the trader faces the obligation to buy shares.