Trader writes Thermo Fisher insurance-11/18/2009

One big investor seems to think that Thermo Fisher Scientific will hold the $45 level and has written protection at that strike to earn income.

optionMONSTER's tracking programs detected the sale of 3,000 March 45 puts for $2.50 and the purchase of 3,000 March 40 puts for $1, resulting in a credit of $1.50. Volume exceeded open interest in both strikes.

TMO was slipped 0.11 percen to $46.09 in late morning trading. The maker of laboratory and pharmaceutical equipment has been consolidating between $43 and $48 since late July, when it gapped higher on strong earnings and guidance. On Oct. 22, it beat estimates again and narrowed the top and bottom ranges for its full-year outlook.

Today's options transaction resulted from a trader selling a put spread. He or she gets to keep the credit if the shares close at or above $45 on expiration. The profits erode below that level and turn to losses under $43.50.

If TMO falls below $40, the trader will need to cover the $5 cost of the spread. However, because of the $1.50 they already earned, the maximum loss would be $3.50.

The trade pushed overall options volume in TMO to almost four times greater than average. Puts accounted for more than 99 percent of the activity.

(Chart courtesy of tradeMONSTER)

See all articles in the option trading area