Why trader is selling News Corp. puts

By David Russell,

Shutterstock photo

News Corp. has been seemingly unstoppable, and one investor is using puts to manage the trade.

optionMONSTER's monitoring programs detected the sale of more than 4,200 October 25 puts for $0.60. Volume was more than 380 times open interest at the strike, indicating that a new position was implemented.

The investor is now obligated to buy shares of the media company for $25 if they're below that level on expiration. But including the credit earned, the purchase price would be $24.40.

NWSA rose 1.65 percent to $24.88 yesterday. The stock is up 23 percent in the last three months, following other media names higher. It's also benefited from a plan to separate its publishing and video businesses.

Selling puts lets the investor program an entry below current price without having to wait for a pullback. If the stock keeps running and closes above $30, the puts will expire worthless and the seller will keep the $0.60 credit. (See our Education section)

Overall option volume was triple 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 Nasdaq, Inc.

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

This article appears in: Investing Options
Referenced Stocks: NWSA

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