Domino's Pizza is near an all-time high, but one trader
apparently thinks that it will stop moving.
optionMONSTER's monitoring programs detected the sale of about
3,000 December 32 calls for $1.65 and a matching number of December
32 puts for $1.30. Volume was more than 7 times open interest in
The trade generated a credit of $2.95, which the investor will get
to keep if DPZ closes at $32 on expiration. Known as a
, the trade is a market-neutral strategy designed to make money
from the passage of time rather than a directional move.
DPZ is down 0.98 percent to $32.22 in early afternoon trading but
has more than doubled so far this year. The restaurant company is
enjoying a surge of business after changing its recipe in 2009, and
repeatedly issued strong earnings reports. (See our new researchLAB
key news events
Given the big gains, some investors now think it will now pause,
and selling a straddle is an ideal way to profit from that
expectation. The investor may be a long-term shareholder who's
willing to sell some of their stock if DPZ continues higher--which
is what the short position in the calls would force them to do.
He or she may be willing to buy stock if they drop below $32, which
is what the short position in the puts would force them to do. Some
traders also sold the December 33 calls and the December 33 puts,
following a similar logic.
Overall option volume is 17 times greater than average so far
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