NXP expected to pause after big move

By
A A A

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 strikes.

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 received yesterday.

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 Education section)

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.


This article appears in: Investing , Options

Referenced Stocks: NXPI

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

Quick on Your Feet
Quick on Your Feet                  
Early Entrepreneurship
Early Entrepreneurship              

Stocks

Referenced

Most Active by Volume

48,099,947
  • $16.09 ▲ 0.50%
40,277,806
  • $102.50 ▲ 0.24%
40,236,499
  • $19.57 ▲ 2.35%
31,092,510
  • $49.75 ▲ 0.65%
30,795,218
  • $34.92 ▲ 0.78%
29,910,855
  • $3.63 ▲ 0.83%
24,019,154
  • $13.06 ▼ 0.38%
23,753,906
  • $74.82 ▲ 1.31%
As of 8/29/2014, 04:04 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com