Little risk seen in Williams pullback

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Williams has been drifting lower, but one investor still likes the name.

optionMONSTER's market scanners detected the sale of 25,858 December 31 puts for $0.85 and the purchase of an equal number of November 32 puts for $0.45. Volume was below open interest in shorter-dated contracts, indicating that an existing position was rolled from one strike to the other.

The investor probably sold the Novembers at an earlier date and has now closed that position. Shifting to December let him or her collect an additional $0.40 of income, while also lowering the price at which they must buy shares. The transaction occurred shortly before expiration this Friday, so the trader probably wants to avoid the risk of being assigned stock if it closes below the strike price. (See our Education section for more on selling puts .)

WMB is down 0.45 percent to $31.93 in midday trading. The natural-gas company hit a multi-year high of $37.56 last month but has been pulling back since then. Shares are now back near their 200-day moving average and the same $32 level where they consolidated over the summer. That could make some chart watchers think further downside will be limited and help explain the put selling.

Overall option volume in the name is almost quadruple the daily average so far today.



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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: WMB

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