RadioShack faces range-bound play

By
A A A

RadioShack has made a big move, and now traders think it's ready to snooze.

optionMONSTER's tracking systems detected the sale of 5,000 October 4 calls for $0.40 and 5,000 October 4 puts for $0.47. That totals up to a credit of $0.87.

Selling calls obligates the investor to unload a stock, making them effectively short at certain levels. Selling puts forces him to her to buy shares on a drop, making them effectively long. Combining the two strategies reflects a belief that the retailer will move neither higher nor lower. If they're right, they'll keep the $0.87 and both contracts will lose value over time. (See our Education section for more on the trade, known as a short straddle .)

RSH is down 1.5 percent to $3.93 this afternoon but has rallied more than 40 percent since the beginning of August. That move came as the shares rebounded from a multi-year selloff and returned to their peaks from mid-May. Some chart watchers may now expect a period of consolidation, which would explain today's option trade.

More than 14,000 contracts have traded in the name so far today, compared with just 6,400 in a typical session.



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: RSH

optionMONSTER

optionMONSTER

More from optionMONSTER:

Related Videos

How to Fire Your Adviser
How to Fire Your Adviser            

Stocks

Referenced

60%

Most Active by Volume

75,750,465
  • $16.77 ▲ 0.36%
59,791,764
  • $101.58 ▲ 0.71%
38,720,622
  • $42.59 ▼ 0.28%
37,416,417
  • $46.52 ▼ 0.51%
35,101,793
  • $16.28 ▲ 0.74%
34,987,975
  • $99.53 ▲ 0.15%
33,760,830
  • $3.63 ▲ 0.69%
32,148,671
  • $17.61 ▲ 0.57%
As of 9/17/2014, 04:15 PM

Find a Credit Card

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