Trade sees bottom in Nasdaq OMC

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Nasdaq OMC Group has refused to participate in any of the market's rally since March 2009, but one trader apparently believes that it has hit a bottom.

optionMONSTER's tracking systems detected the sale of almost 3,600 March 18 puts, most of which priced for $1.20, against open interest of 235 contracts. The transaction pushed total options volume in the thinly traded financial stock to 9 times greater than average.

NDAQ NDAQ fell 0.67 percent to $19.30 on Friday and has been moving sideways for the last 22 months. During that time, it established support several times around $17.40 (orange line on chart) and more recently put in a higher low at $18.

The put seller is betting the stock will remain above that level, though it could fall as low as $16.80 without them losing money because of the premium earned. (See our Education section)

Profit and revenue was better than expected the last time earnings were reported on July 27. The company is benefiting from improved market share in options trading and growing demand for its services, such as shareholder communication and market intelligence. It also increased its share buyback program by $100 million.

The next release is scheduled for the premarket on Oct. 29.

Another reason for selling puts is that options premiums are overpriced in NDAQ relative to its recent propensity to move. Implied volatility is 32 percent, compared with the approximately 26 percent realized volatility over the last 10-, 30-, and 50-day periods.

If implied volatility falls toward the historical levels, it will depress the value of the short puts, favoring the trader.

(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.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: NDAQ

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