One investor is using options to calm the waters in Bank of New
Our tracking systems detected the sale of 2,853 October 23 calls
for $0.65 and the purchase of an equal number of September 22 calls
for $0.90. Volume was below open interest in the Septembers but not
the Octobers, which indicates that an existing short position was
rolled from one contract to the other.
The investor almost certainly owns shares in the iconic
institution, which traces its roots to Alexander Hamilton in the
late 18th century. He or she is
selling calls against the stock
to generate income and reduce volatility. Yesterday's transaction
cost them $0.25, and gives them the right to sell BK for $1 more
Rolling short near-the-money calls lets the investor capture the
greater time value in the longer-dated contracts. In return, they
forfeit runaway profits if the shares rally strongly. The strategy
also lets them continue to collect dividends. See our
for more on how options can be used to manage risk.
BK rose 0.58 percent to $22.41 yesterday, and is up 5 percent in
the last month. Shares have been working their way higher since
last October, but remain in the middle of their recent trading
Some 6,600 contracts traded in the name yesterday, versus average
turnover of fewer than 2,600.
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