Traders want to print money with Lexmark.
optionMONSTER's trade scanners detected the sale of almost 2,400
August 37 puts for $0.70 to $0.65. Volume was more than triple
previous open interest at the strike, indicating that new positions
creates an obligation to buy shares at the strike price if they're
below that level on expiration. He or she is essentially providing
insurance to the market, agreeing to compensate other traders on a
drop below $37. If it holds above the strike, the puts expire
worthless and they'll keep the premium as profit.
Traders use this strategy when they like a stock but don't want to
shell out cash to get long up front. It has the double advantage of
letting them collect income while programming a buy order
below the current price
. The main risk is a dramatic selloff. (See our
LXK rose 0.27 percent to $37.49 yesterday and is up 58 percent in
the last six months. Although most of its revenue still comes from
the weakening computer-printer market, the company has been growing
quickly in software and services. Earnings beat expectations the
last two quarters.
Total option volume was twice the daily average in the session.
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