Back to Main

Trade sees no going back for Sensata

By: optionMONSTER
Posted: 6/28/2011 1:34:00 AM
Referenced Stocks: ST

Sensata Technologies has doubled since its IPO last year, and one trader is betting that it won't fall soon.

optionMONSTER's tracking systems detected the sale of more than 4,500 July 35 puts for $0.25 against open interest of just 938 contracts. The trade pushed total options volume in the thinly traded name to 18 times greater than average.

ST rose 1.6 percent to $36.89 yesterday. The maker of industrial sensors and control systems has been rallying for the last seven sessions after bouncing at its 100-day moving average in mid-June.

The Japanese earthquake caused management to cut guidance the last time it reported earnings on April 21, but the shares appear to be in a long-term uptrend nonetheless.

Selling puts will obligate the investor to buy shares for $35 if ST falls below that level. The strategy is a common way to make a small amount of income from a stock that's trending higher. (See our Education section)

Bain Capital bought the company from Texas Instruments in 2006, and took it public at $18 a share in March 2010. Though founded in 1916, this is its first stint as a standalone business.

Such stocks often rally as they become known to institutional investors. Car-rental companies like Hertz Global followed a similar trend recently because they, too, were once parts of larger firms.

ST also appears to have benefited from strong demand for capital goods, which caused industrials to outperform the broader market over the last 12 months.