Markets

Hasbro faces range-bound strategy

One trader apparently thinks that Hasbro will have an uneventful New Year.

optionMONSTER's tracking programs detected the sale of about 2,800 January 32.50 calls for about $2 and an equal number of January 32.50 puts for $0.60. Volume was more than 5 times open interest in both strikes.

The trade resulted in a credit of about $2.60, which the investor will get to keep if the toy maker closes at $32.50 on expiration. The profit will erode on either side of that level and turn to losses below $29.90 and above $35.10.

This trade is known as a short straddle because it looks for the share price to hug a certain level rather than move in a specific direction. It's an example of a market-neutral strategy that profits from the passage of time , which will cause the options to lose value at an accelerating pace in the next five weeks. (See our Education section)

HAS fell 0.82 percent to $34.02 on Friday and has lost more than 20 percent of its value in the last six months. Its last earnings report on Oct. 17 missed estimates as the company continued to lag Barbie Doll maker Mattel.

The shares are attempting to bottom out around their current level following their big slide since the summer. Based on the short straddle, the investor expects it will spend time around its current price or drop slightly in the near term.

Overall option volume was 21 times greater than average in the session.

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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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