Spirit AeroSystems (SPR) investor sells upside

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Moderately bearish options action crossed the tape in Spirit AeroSystems Holdings Inc. (NYSE: SPR ) out of the gate on Wednesday thanks to an investor who appears to have sold a hefty number of calls. Shares of SPR were trading around $20.63 at the time of the trade. The out-of-the-money (OTM) SPR September 22.5 calls were active during morning trading likely due to selling.

At 9:36 a.m. EDT, 4,000 OTM September 22.5 calls crossed the tape for 35 cents per contract. This price was right at the bid when the volume hit the tape. Current open interest in this line is 23 contracts. This options action suggests the investor sold to open this lot of calls and collected 35 cents per contract to do so (a total of $140,000).

The premium collected also represents the maximum profit on this short call position. The investor will keep the entire credit if the stock is still trading lower than the strike price at expiration. This means the stock has roughly 10% of upside left before the seller loses money on this trade, which is why this is a moderately bearish strategy.


Losses on this trade are theoretically unlimited if the stock soars higher than the breakeven price of $22.85 and continues to the upside. If the stock is trading higher than this level at expiration, the investor will lose money in direct relation to any upside in the stock. It's interesting that at least one investor is willing to cap gains and potentially suffer unlimited losses to call for limited upside in SPR during the near term.

Shares of SPR dropped 15 cents, or nearly 1%, during morning trading. The stock is slightly underperforming the broad-market weakness out of the gate today. The company did not announce any news today, but is due to release earnings figures on Aug. 3 before the market opens. Analysts estimate earnings of 42 cents per share.



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.




This article appears in: Investing , Options

Referenced Stocks: SPR

Karla Yeh

Karla Yeh

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