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Bull manufactures long Tyco position

Tyco is attempting to rebound, and one investor is selling puts and buying calls to get long.

The trade involved about 4,000 contracts in each at the October 41 strike. The calls were bought for about $2.80 and the puts were sold for about $2.35. That translates into a cost of about $0.45.

The resulting position mimics owning shares in the industrial conglomerate, whose products range from sprinkler systems to alarms and sewage valves. TYC is up 0.39 percent to $41.57 this afternoon. If it pushes higher, the traders will profit almost immediately on the calls.

They also stand to lose money to the downside, and will be forced to buy shares for $41 if TYC closes below that level on expiration.

The company's last earnings report on July 28 beat estimates on the top and bottom lines, but that wasn't enough to prevent it from skidding along with the broader market. It has also been considered a potential takeover target at the hands of France's Schneider Electric.

Overall options volume in the stock is triple the daily average so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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