Confidence shown in Time Warner

By David Russell,

Shutterstock photo

One investor is selling puts in Time Warner as the media stock returns to levels last seen when the tech bubble was deflating.

optionMONSTER's tracking programs detected unusual volume in the October 41 puts, with 10,250 contracts trading against open interest of 1,724 contracts. They all changed hands for the $0.31 bid price, indicating that they were sold.

The investor is now on the hook to buy shares in the media company for $41 if they close below that level on expiration. But including the premium already received their entry price would be $40.69. Should the stock remain above $41, they'll keep the $0.31 credit and options will expire worthless.

Selling puts
is a common strategy when investors like a stock but don't want to expend capital getting long right away. It lets them program an entry at a lower price if a pullback occurs, while also letting them make some money if it never touches to their desired level. (See our Education section)

TWX is down 0.3 percent to $43.51 in morning trading but is up 23 percent in the last three months. Earlier in the session it touched $43.84, its highest level since mid-2001. Today's put sale pushed total option volume in the name to more than triple the daily average

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
Referenced Stocks: TWX

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