Trader calls a floor in Citrix Systems

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Traders are banking on second-half strength in Citrix Systems.

The maker of cloud-computing software has been clinging to the $62 level since cratering on a poor earnings report in late April. Management blamed the miss on big customers delaying orders.

Rival VMware has followed a similar pattern but saw upside call buying two weeks ago. Yesterday, the option action hit in CTXS as investors sold 2,500 July 62.50 puts for $3 and bought 2,500 July 55 puts for $0.55. Volume was more than quadruple open interest at each strike, indicating that new positions were initiated.

Selling puts lets the investor earn income from shares closing above a certain level on expiration, in this case $62.50. Owning puts at the lower strike hedges against a major drop, in this case below $55. (See our Education section for more on credit spreads such as this.)

CTXS rose 0.02 percent to $61.96 yesterday. The credit spread will earn its maximum profit of $2.45 if the shares climb just anywhere above $62.50 five weeks from now. The trader will be assigned shares below that level, which he or she may want to do anyway if they already think it's near a bottom. Including the credit earned, their entry price would be $60.05.

Total option volume was quadruple the daily 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 The NASDAQ OMX Group, Inc.

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


This article appears in: Investing , Options

Referenced Stocks: CTXS

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