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
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.