Range play targets Nationstar Mortgage

By David Russell,

Shutterstock photo

Nationstar Mortgage has been climbing in the last month, but one investor is looking for a pause.

optionMONSTER's tracking systems detected the sale of 3,300 January 17.50 puts for $3.30 and 3,300 January 20 calls for $2.50. Volume is more than 19 times open interest in both strikes.

The trader collected a credit of $5.80, which he or she will keep as profit if NSM stays between $17.50 and $20 on expiration. Gains will erode outside that range, turning to losses below $11.70 and above $25.80.

Known as a short straddle , the position is designed to profit from the passage of time rather than a directional move. (See our Education section for other market-neutral strategies.)

NSM is up 1.4 percent to $18.84 today. The mortgage-service company went public at $14 a share on March 8, moved sideways for two months, and started climbing in early May.

Overall option volume is 35 times greater than average 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: NSM

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