One investor is using options to manage a trade in NxStage
Our tracking systems detected the sale of 3,300 December 15 puts
for about $1.52 against no previous open interest. He or she is now
obligated to buy shares for $15 if they drop to that level.
The benefit of the strategy is that if the stock never goes that
low, the trader simply keeps the premium and the puts will expire
worthless. Below $15, the trader will be assigned stock, but the
effective entry price would be $13.48. That was major consolidation
range in 2007 and mid-2010, so the shares might draw buyers there
Selling the puts
established that entry price now eliminated the need to time the
purchase. (See our
section for more on how options can be used to
manage such trades
NXTM fell 2.54 percent to $15.34 on Friday. It rallied about 400
percent between mid-2009 and early 2011 but has been drifting lower
since. The company's devices are used for treating patients with
conditions such as kidney failure.
The put sale pushed total option volume in the stock to more than
100 times average levels.
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.
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