One investor is targeting a key level on the chart of United
optionMONSTER's monitoring systems detected the purchase of 3,500
January 75 puts for $3.30. Equal-sized blocks were sold at the same
time in the January 87.50 calls for $0.94 and the January 67.50
puts for $1.56.
The investor is probably using the strategy to hedge a long
position in the industrial conglomerate. He or she is targeting an
exit price of $87.50, the exact same level where UTX peaked in
March before reversing lower. That could be leading some chart
watchers to expect a rally back to that price, followed by a pause.
The trader sold those upside calls to help finance the
purchase of the puts
, which will provide a hedge against a drop. The investor now
stands to collect $7.50 if the stock falls to $67.50. It cost $0.80
to open the position, which implies a profit of more than 800
percent if that decline occurs. (See our
UTX rose 1 percent to $78.77 yesterday, continuing to trade in the
middle of its range for the last two years. Recent earnings reports
have been mediocre because of weakness in Europe.
Overall option volume was almost twice the daily average, with that
bearish three-way trade accounting for more than half the
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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