NXP Semiconductors has made a big move in a short time, but one
trader apparently thinks that it's due for a pause.
optionMONSTER's tracking systems detected the sale of about 5,000
October 37.50 calls for $2.82 and a matching number of October 30
puts for $3.13. Volume was more than 19 times open interest in both
Known as a short strangle, the strategy generated $5.95 of income.
The trader will keep that money if NXPI closes between $30 and $37
on expiration. Profits will erode on either side of that range,
with about $6 of leeway higher or lower thanks to the credit
NXPI ended the session down 2.22 percent to $33.42 but is still
close to its all-time high of $34.80 established earlier in the
month. The Dutch company is laden with debt and majority-owned by
private-equity firms after going public last August.
It struggled for several months following the IPO, then took off in
early December after one of its chips was included in Samsung's
Nexus S cell phones. It's up more than 150 percent since then.
Yesterday's option trader apparently believes that NXPI will churn
sideways into autumn. The investor may also expect implied
volatility to continue falling, which would depress premiums and
favor the short position in the options.
The company reports earnings on May 4. If the news is uneventful,
that would additionally support the short strangle. (See our
The activity pushed overall option volume in the name to about 14
times greater than average.
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.