One investor is turning time into money with Allstate options.
Our tracking systems detected the sale of about 7,800 October 33
calls for about $2.25. A similar number of July 32 calls was
purchased at the same time for $2.60, but volume was below open
interest at that strike.
This suggests that the trader had previously sold the July
contracts and rolled the short position to the higher strike. He or
she probably owns the insurance stock and is using the options to
manage risk. (See the discussion of
Yesterday's transaction cost about $0.35 and gave the trader the
right to collect an additional $1 of upside on the shares. That
money comes from the additional time value in the October
contracts, which is collected by writing longer-dated options.
ALL rose 1.4 percent to $34.71 yesterday and is up 27 percent so
far this year. Because the calls sold short are
in the money
, the investor has surrendered the right to profit from further
upside in the stock. Instead, this is a low-risk position more akin
to a fixed-income trade than owning equity.
The transaction pushed overall option volume to 6 times greater
than average in the session.
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