General Cable has been volatile this week, but someone thinks it
will stop moving soon.
optionMONSTER's monitoring programs detected the sale of about
3,000 contracts each in the January 21 puts and the January 27
calls. The puts fetched $1 and the calls brought in $2.05, yielding
a total credit of approximately $3.05. There was barely any open
interest in either strike when the trade occurred.
The strategy is known as a strangle, and is designed to profit from
BGC moving sideways rather than rallying or dropping. The investor
will keep that $3.05 credit if shares remain between $21 and $27 on
expiration. Outside of that range the profits will diminish and
eventually turn to losses. See our Education Section for more.
BGC is up $5.63 percent to $25.89 in midday trading but has lost
more than one-quarter of its value in the last three weeks. The
company, which makes a wide range of electrical cables, issued
results on Monday afternoon that were significantly worse than
expected. Management also cut guidance, citing weak demand and high
costs, and shares gapped lower on the news.
Given that recent drop, some chart watchers may believe that it
will take a while before BGC rallies. But it's bounced at a
long-term support level running back to early 2009, which could
also make traders think that downside is limited. Those technical
considerations may help explain the reasoning behind today's short
Overall option volume in BGC is 22 times greater than average so