Stillwater draws three-way strategy

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At least one trader apparently believes that Stillwater Mining has further upside.

SWC optionMONSTER's Heat Seeker tracking system detected an unusual three-part trade on the company, which mainly produces platinum and palladium. The investor bought 2,000 April 19 calls for $3.28 and sold 3,000 each of the April 24 calls and the April 17 puts for $1.06 and $0.96, respectively.

The strategy cost about $0.25 per contract owned and will earn a maximum profit of 1,900 percent if SWC closes at $24 on expiration. The strategy was different than most because only 2,000 calls were bought while 3,000 upside contracts were sold. As a result, the gains will erode if the stock climbs past $24 and turn to losses over $35.

The shares fell 0.63 percent to $20.52 yesterday but are up 57 percent in the last six months. The company has benefited from strong metal prices and is expanding into new areas such as recycling.

SWC is now consolidating below the same $22.70 area where it peaked in early 2008. The next likely resistance is probably around $24, a support level in 2000 and 2001. That could explain why the investor selected $24 as the target for their position.

The trade pushed overall options volume in the stock to 9 times greater than average yesterday.

(Chart courtesy of tradeMONSTER)



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.

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This article appears in: Investing , Options

Referenced Stocks: SWC

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