Trade sees Big Lots support holding


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On investor apparently thinks that Big Lots is at a solid support level.

optionMONSTER's tracking programs detected the sale of about 4,500 October 30 puts for $0.14 to $0.20. Volume was almost quadruple the previous open interest at the strike, indicating a new position.

The investor is now obligated to buy shares in the discount retailer for $30 if they're below that level on expiration two days from now. Above it, the contracts become worthless and the trader will keep the credit earned as profit.

The benefit of selling puts is that investors can make money from stocks they like without ever having to buy shares. It also programs a buy order at a certain level that they may consider an attractive entry point, in this case $30. (See our Education section for more on how options can be used to manage positions.)

That's the same level where the stock bounced several times in the last two years and where it's been holding support since gapping lower in August after a bad earnings report. This could be leading some traders to believe that it will hold this level or push higher.

BIG fell 0.94 percent to $30.60 yesterday. The put selling pushed total option volume in the name to 11 times greater than average in the 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

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