Hedge stays flexible on Flextronics


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Flextronics is stalling near long-term highs, and one investor is hedging a position in the stock.

optionMONSTER's monitoring programs detected the sale of some 5,500 June 7 calls on Friday, most of which priced for $0.50. Volume was more than 7 times the previous open interest at the strike, indicating that new positions were initiated.

The trader probably owns shares in the contract-manufacturing company and is bracing for a possible pullback. The investor is now on the hook to unload the stock for $7 if it closes below that level on expiration, but he or she already collected a credit that will offset a drop to that price. Such trades are common when a short-term drop is expected. (See the discussion of covered calls in our Education section for more.)

FLEX rose 0.4 percent to $7.46 in the session and is less than 2 percent below its 52-week high from the previous week. It's been trending steadily higher despite mediocre quarterly results and is up 29 percent in the last six months.

Friday's call selling pushed total option volume in the company to almost 20 times greater than its average for the last month.

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

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This article appears in: Investing , Options

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