Markets

Flextronics gets huge range-bound trade

Flextronics has been stuck at $8 for the last two months, and one investor is looking for it to remain at this level for the next four months.

optionMONSTER's tracking systems detected the sale of 24,500 July 8 puts for $0.60 and 24,500 July 8 calls for $0.70. Volume was more than 9 times open interest in both strikes.

The trade resulted in a credit of $1.30, which the investor will keep if FLEX closes at $8 on expiration. Known as a short straddle, the position is a market-neutral strategy designed to profit from a stock remaining trapped in a range rather than rising or falling. (See our Education section)

The stock is up 5.03 percent to $8.14 in late morning trading. It rallied more than 60 percent between early September and mid-January but now appears to be stalling around the same $8 level that has provided resistance since late 2009 (dark orange line on chart at right).

FLEX provides contract-manufacturing services, assembling electronics such as mobile phones and computers for other firms. Its last earnings report on Jan. 20 beat forecasts, and guidance was ahead of consensus.

Implied volatility has been rising in FLEX, climbing to about 38 percent, while realized volatility is below 30 percent. The straddle seller may be looking to take advantage of that premium because, if implied volatility drops, it will depress the value of the calls and puts sold short.

The trade pushed overall option volume in the name to 45 times greater than average.

(Chart courtesy of tradeMONSTER)

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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