Strategy plays calendar with VeriSign

By David Russell,

Shutterstock photo

One trader is betting that VeriSign will remain trapped below $40.

optionMONSTER's tracking programs detected the sale of 5,000 September 40 calls for $2.26 and the purchase of an equal number of January 40 calls for $3.56. Volume was below open interest at both strikes.

Known as a calendar spread , the strategy will profit from VRSN staying in a range over the next four months. The September contracts will lose value more quickly, causing the position's net value to increase. The investor can then keep the January calls looking for a rally after September expiration or close the trade. (See our Education section)

The trader risks losing money if the stock closes above $40 because he or she would have to use the January contracts to cover the short position in September. The investor may feel comfortable betting on that level because it's been resistance several times since the tech bubble broke more than a decade ago.

VRSN, which registers websites, rose 2.49 percent to $39.58 yesterday. It came into the session down 8 percent over the preceding month.

Overall option volume was almost 10 times greater than average in yesterday's 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: VRSN

More from optionMONSTER




Follow on:

Find a Credit Card

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