One trader is apparently nervous ahead of quarterly results by
LED company Veeco Instruments tonight.
optionMONSTER's Depth Charge tracking system detected the purchase
of about 2,000 August 29 puts for roughly $1.09 and the sale of an
equal number of August 33 calls for $0.96. Volume was more than 14
times the previous open interest in each strike, so this is new
The trade cost $0.13 and will make money if the manufacturer of
light-emitting diodes falls below $28.87 over the next 3-1/2 weeks.
It also obligates the investor to sell shares above $33, so he or
she is probably using it to protect a long position in the name
ahead of this evening's potentially big earnings news.
Known as a
, the trade is a common hedging strategy that uses the income from
selling calls to finance put protection. If done without owning the
equity it's similar to shorting stock, with similar upside risk.
VECO began the year by rallying more than 60 percent between early
January and mid-May, but it has been trapped in a range since then.
Shares fell 1.98 percent to $30.76 yesterday.
Overall option volume was 10 times greater than average in the
session, according to the Depth Charge.
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