Louisiana-Pacific is back to long-term resistance, and one
investor thinks it may drop.
optionMONSTER's Depth Charge monitoring system detected the
purchase of 2,100 January 10 puts for $0.87 and the sale of an
equal number of January 12.50 calls for about $1.04. Volume was
more than triple the open interest at each strike, indicating that
this was new activity.
The trader collected a credit of $0.17 and stands to make money
from the lumber stock pushing lower through early next year. He or
she probably owns shares and is using the strategy as a hedge. In
that case it would be a collar, a common strategy for managing
LPX slipped 0.51 percent to $11.75 yesterday but is up more than 40
percent so far this year. The stock has been riding a wave of
optimism about the housing market but is now sitting around the
same level where it peaked early last year. That could be leading
some chart watchers to believe that it will struggle to rise
The advantage of yesterday's trade is that the investor uses money
from selling the upside calls to buy the downside puts. The trader
probably thinks that a push all the way to $12.50 is unlikely. Even
if LPX went so high, he or she would probably be happy to exit at
Using long-dated contracts also delays the actual sale price until
January, which could have tax benefits. (See our
section for more about how options can be used to manage
Nearly 5,200 contracts traded in the name yesterday, almost 5 times
its daily average.
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