Masco has been running like a racehorse, and one trader
apparently thinks that it needs to take a breather.
optionMONSTER's tracking programs detected the sale of 2,300 July
14 puts for $0.60 and
2,300 July 21 calls for $0.70. Volume was more than 15 times the
previous open interest at each strike, showing that this is new
Known as a
, the trade resulted in a credit of $1.30. The investor will keep
that money as profit if the maker of building materials remains
between $14 and $21 through expiration six months from now. The
winnings will erode outside that level, turning to losses below
$12.70 and above $22.30.
While options can be used to place direction bets on shares rising
or falling, they can also be sold to make money from a range-bound
move. Such trades are known as
strategies. (See our
MAS, whose products include cabinets, paint, and faucets, rose 1.26
percent to $17.69 on Friday. The stock is up 55 percent in the last
year amid improving sentiment in the housing market, but the
strangle seller now apparently expects a pause.
It faced resistance at $14 for much of 2012, which could be leading
the trader to believe that this level will hold as downside
support. In addition, the stock saw peaks between $18 and $22
several years ago, so he or she might think that it will struggle
to go above that price range.
The trade pushed total option volume to almost 6 times greater than
average in the session.
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