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
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
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
If implied volatility falls toward the historical levels, it will
depress the value of the short puts, favoring the trader.
(Chart courtesy of tradeMONSTER)
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