Williams fell after cutting its outlook, and one investor is
looking for a rebound.
The natural-gas stock dropped 3.04 percent to $18.52 in morning
trading after management said its previous forecasts for profit
this year and next were too high. The company said lackluster
demand and large inventories were hurting prices.
WMB is down 12 percent in the last three months and has been
building support around $18. Today it snapped back quickly from a
drop of as much as 5 percent, suggesting that some investors want
to own the shares around these levels.
The option activity consists of a bullish combination trade: A
block of 10,000 January 20 calls was purchased for $0.90, matched
against the sale of 10,000 January 17.50 puts for$1.10. Volume was
above open interest in both strikes.
The investor collected a credit of $0.20 and will make unlimited
profits if the natural-gas stock rallies above $20 by expiration.
He or she will lose money if it falls below $17.30, and the
position will expire worthless if WMB fails to move in either
The trade is an example of how investors can use options to place
large bets on a stock without having to commit capital or
accumulate shares. Today's position is the equivalent of owning at
least 1 million shares, about one-sixth the average stock turnover
Overall options volume in the name was more than twice the average
level, according to the Heat Seeker.
(Chart courtesy of tradeMONSTER)
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