Can Williams range trade be repaired?

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Someone is hoping that time will heal all wounds in a bet against Williams.

optionMONSTER's tracking programs detected the sale of 5,906 contracts each in the November 25 puts for $0.12 and the November 30 calls for $2.74. An equal-sized block was purchased at the same time in the August 29 calls for $3.10, but volume was below open interest.

It appears the investor is rolling forward a so-called strangle trade , which makes money from a stock remaining in a range. He or she had probably sold both puts and calls in August. Now that the stock has climbed, the puts are worthless but the trader is facing losses on those calls.

Adjusting the position gives an additional three months for the trade to work. The investor is now expecting WMB to stay between $25 and $30, whereas the range's previous upper bound was $29. (See our Education section)

Shares of the oil and natural-gas pipeline company rose 0.68 percent to $32.37 yesterday. Overall option volume in the name was about 25 percent higher than its daily average, with that big three-way trade accounting for almost all the activity.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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