• 
• See all for Karla Yeh
• View Print Version

• Options News Network
• Free Options Trading Alerts
• Learn About Options

• PAAS 100% Rate It

Pan American Silver Corp. (NASDAQ: PAAS ) shares are on the rise during Tuesday's trading session without any clear catalyst, but options action on the tape so far suggests an investor expects the upside to be short-lived and expressed that bet by selling near-term calls.

At 10:34 a.m. EST, a block of 3,630 August 28 calls changed hands for $1.20 per contract , which was closer to the bid price when the volume hit the tape. These out-of-the-money ( OTM ) calls are home to current open interest of just one contract, indicating the investor traded this block to open. This options action indicates the investor took in a premium of $1.20 per contract ($435,600 in total for the 3,630-lot) on a bet that PAAS shares will not be trading higher than $29.20 at August options expiration, or that the stock will not rally more than 8% prior to expiration. If the stock does hit a ceiling and stays below the breakeven price, this short call trade could turn a maximum profit of the premium collected, or $1.20 per contract. If PAAS shares rally higher and are trading beyond the breakeven price at expiration, maximum loss on this short call position is theoretically unlimited to the upside.

While selling calls bets on limited upside, the strategy also allows for slight upside before the investor loses money - this is why this is a moderately, not exceedingly, bearish play. For a visual of this short call position, build a profit/loss graph by opening a free virtual trading account today. If you are also bearish on PAAS and want to trade in the real world, don't miss out on $2.95 flat-rate stock trades available at OptionsHouse .

PAAS did not announce any news today to account for the pop-up in the stock. PAAS shares are currently up more than 1%, or 34 cents, to $26.97.

Related Options Articles

• 
  Positive Economic Data Lifts Stocks to Strong Weekly Finish
  5/17/2013 04:23 PM
• 
  Barrick Gold Corporation Bombarded by Call Buyers
  5/17/2013 03:10 PM
• 
  Buyers can't get enough of T-Mobile
  5/17/2013 01:20 PM