Volatilty seller plans to stay at Wyndham

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Wyndham Worldwide is reeling after equities sold off this month, and now one investor thinks the volatility will die down.

optionMONSTER's tracking programs detected the sale of about 2,000 each in the October 29 calls and the October 29 puts. Both priced for about $2.05 to $2.25, with dozens of small blocks crossing out systems. Volume was more than 10 times open interest in each.

The trade resulted in a credit of about $4.20, which the investor will get to keep that money if the hotel and timeshare company closes at $29 on expiration. Gains will erode on either side of that level, but she or she will make some kind of profit as long as it stays between about $25 and $33.

Known as a short straddle, the strategy is designed to profit from option premiums falling over time. That happens normally because of time decay, but will be amplified if implied volatility declines. See our Education Section for more.

WYN rose 2.04 percent to $29.53 in morning trading. It had peaked at $36 last month, which was its highest price in more than four years.

Overall options volume is about triple the daily average so far today.



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: WYN

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