One trader apparently suspects that Nationstar Mortgage might be
running out of steam.
optionMONSTER's Depth Charge monitoring system detected the
purchase of 4,706 January 40 puts for $5.40 and the sale of an
equal number of January 45 calls for $4.40. Volume was almost
quadruple open interest at both strikes, indicating new positions
Owning puts locks in a price where shares can be sold in the
mortgage-servicing company, while selling calls forces the trader
to unload stock if it climbs to a certain level. Combining the two
while owning shares is known as a
. (See our
section for other hedging strategies.)
Given the $1 debit it cost to open the position, the trader has
ensured a minimum exit price of $39 and a maximum of $44 through
early next year. He or she may have bought the stock at a lower
price and now wants to delay profit-taking for tax purposes.
NSM fell 1.65 percent to $41.10 yesterday but has more than doubled
in the last year. It has consistently reported strong earnings as
large banks outsource the servicing of home loans.
Total option volume was almost 5 times greater than average in the
session, according to the Depth Charge.
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.
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