NXP Semi faces range-bound play


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NXP Semiconductors has made a big move, and now traders are looking for a pause.

optionMONSTER's scanning programs detected the sale of 2,500 December 42.50 calls for $1.20 and 2,500 December 42.50 puts for $2.20. Volume exceeded open interest at each strike, indicating that new positions were initiated.

Known as a short straddle , the transaction generated a credit of $3.40. That will be the investor's profit if the chip maker closes at $42.50 on expiration. Gains will erode on either side of that level, turning to losses under $39.10 and over $45.90. (See our Education section for more on market-neutral strategies , which make money from the passage of time rather than a directional move.)

NXPI is down 0.79 percent to $41.26 in morning trading but is up 57 percent so far this year. It gapped higher after a strong quarterly report last month, then stalled around $42.50. That could make some chart watchers expect that level to become resistance and help explain today's trade.

Total option volume is more twice the daily average in the name so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: NXPI

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