Large trade bets on NCR rebound

By David Russell,

Shutterstock photo

A large trader is looking for NCR to rebound after pulling back last month.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 January 39 calls for $1.20 and the sale of an equal number of January 33 puts for $0.90. Volume was more than 10 times open interest at both strikes, indicating that new bets were placed.

Owning calls
locks in the price where a stock can be purchased, while selling puts generates income but creates an obligation to buy in the event of a pullback. Combining the two strategies produces a highly leveraged long position. (See our Education section)

The trader paid just $0.30 and stands to earn huge profits if the maker of bank-teller machines and cash registers pushes above $39.30 on expiration. He or she also faces losses on a drop below $33. If the stock remains between those two levels through mid-January, the position will expire worthless.

NCR rose 2.87 percent to $36.54 on Friday. It's up 43 percent so far this year but is down 8 percent in the last month after quarterly revenue missed expectations on Oct. 24.

The shares are now attempting to stabilize near their 100-day moving average. They also peaked around $33 in June, which could make some chart watchers comfortable writing puts at that level.

Total option volume was 6 times greater than average in the session, according to the Heat Seeker.

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: NCR

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