Collar trade sees resistance for Williams

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Williams has snapped back after a big drop, but one investor is hitting the sell button on the natural-gas company.


optionMONSTER's Depth Charge monitoring program detected the purchase of 15,500 November 23 puts for $0.90 and the sale of an equal number of November 27 calls for $3.31.

There was also heavy trading in the August 26, 27, and 28 calls around the same time, but it doesn't appear to be related.

The large trade in November seems to have been a collar, in which a shareholder sells calls to lock in an exit level and buys puts to protect against a drop. Yesterday's trade generated a credit of $2.41. If WMB closes at or above $27 on expiration, the trader will collect $29.41, slightly above the $28.67 closing price.

The gains erode below $27, but the downside stops at $25.41 thanks the combination of the credit and the puts. (See our Education section)

WMB closed rose 3.58 percent yesterday but is pushing against the same $28-$29 level that had been support in June and July. Some investors may now look for resistance to form around this area on the chart.

The collar accounted for more than half the option volume in WMB yesterday.



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

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



This article appears in: Investing , Options

Referenced Stocks: WMB

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