One investor is ringing the register in Tyco as the industrial
stock remains parked at long-term resistance.
optionMONSTER's Depth Charge monitoring program detected the sale
of 6,500 October 55 calls for $3.05 and the purchase of an equal
number of October 50 puts for $0.45. Volume was more than 5 times
the open interest at each strike, indicating new activity.
TYC rose 0.19 percent to $56.65 yesterday and is sitting around the
same price where it peaked earlier in the year. It's also the same
level where the stock rolled over in early 2005, so chart watchers
could think that a top is in place for now.
Yesterday's investor probably owns shares and is using the options
as a hedge. He or she collected a credit of $2.60 and is now
obligated to exit their position if the stock remains above $55
through expiration. The trader is also ensured a minimum price of
Because of the credit earned, the effective sale price would be
$57.60 to the upside and $52.60 to the downside. The trade is a
version of a
Some of the activity occurred around the same time that some August
50 calls and August 52.50 calls were bought below open interest.
This suggests that the investor closed a
and replaced it with the collar. (See our
Overall option volume was 8 times greater than average in the
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