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Income strategy in American Axle

By: optionMONSTER
Posted: 8/13/2013 10:54:00 AM
Referenced Stocks: AXL

One trader wants to turn time into money with American Axle & Manufacturing.

optionMONSTER's tracking systems detected the sale of 1,750 September 20 calls for $1.075 and the purchase of 1,000 August 19 calls for $1.375. Volume was below open interest in August, which suggests that an existing position was closed, rolled forward in time and increased in size.

The investor probably owns shares in the maker of automotive drivetrain systems and sold the contracts as part of a covered-call strategy . Adjusting the position let him or her raise the price at which they must divest stock, allowing them to extract more time value from the options. (See our Education section)

AXL is up 0.65 percent to $20.27 in morning trading and has risen 81 percent so far this year. Most of those gains followed a strong earnings report in early May and came at the same time that sentiment brightened in the broader automotive space.

Today's trader boosted the number of contracts, yielding a credit of $50,625. They also increased by 75 percent the number of shares they must unload if AXL remains above $20 through September expiration.

Total option volume is triple the daily average so far in the session.