Solazyme premiums spur call selling

By David Russell,

Shutterstock photo

Traders are selling calls in Solazyme, looking to profit from its rich option premiums.

Our tracking systems detected volume of more than 2,500 December 15 calls in the alternative-energy company, which converts plant matter and food oils into fuel. The contracts priced for $0.40 and $0.45, while volume was almost 65 times previous open interest in the strike.

Implied volatility in the stock is 57 percent, compared with its 42 percent realized volatility. That means the options are pricing in a greater move than the stock has historically made. Selling calls is a common way to take advantage of that discrepancy.

SZYM gained 9.25 percent to $10.75 yesterday after finding support at $10. The stock has been trending lower since last July, when it peaked above $27. It also formed a double top around $16 earlier this year, which could make some chart watchers think that resistance is taking shape.

Yesterday's call seller is now obligated to unload SZYM shares for $15 if they close above that level on expiration. (See our Education section)

Overall option volume was quadruple the daily average in the session.

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: SZYM

More from optionMONSTER




Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by