Taking profits in Magna


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Magna International has fought its way back to where it traded before the 2008 stock-market crash, and one investor is taking profits.

MGA optionMONSTER's tracking systems detected the sale of 7,100 September 60 calls for $16.30 against open interest of just 348 contracts. The trade pushed total options volume in the auto-parts maker to 21 times greater than average.

MGA fell 0.60 percent to $75.81 yesterday. It's more than tripled off its 2009 lows, but the gains have slowed recently as the shares hit resistance around the same levels where they peaked before the subprime crisis drove equities over the precipice.

MGA company reported better-than-expected earnings, raised guidance and boosted its dividend on Aug. 6. But since then it's been moving sideways and failed to make new highs.

Thursday's options were probably sold by an investor seeking to unload shares. Writing in-the-money calls is a common method for timing a sale and locking in an exit price.

The transaction gives him or her the right to divest 710,000 shares. Selling that amount of equity may have been difficult without impacting price because MGA's average daily volume is just 766,000 shares. See our Education Section for other examples of how investors can use options to manage portfolio risks.

(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 Nasdaq, Inc.

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This article appears in: Investing Options
Referenced Stocks: MGA

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